by Bill McBride on 8/06/2008 12:18:00 PM
Wednesday, August 06, 2008
On Alt-A from Brian:
[Freddie has] $190B of Alt-A in the guarantee portfolio, $93B of which is in their 7 high DQ states (CA, FL, AZ, VA, NV, GA, MI, MD), and $115 of which is 06/07 vintage. 29% have current LTV>90% and 17% have current LTV >100% (chart 27 has a matrix of different cuts at the guarantee portfolio - there are quite a few high risk loan categories where the % of loans with current LTV>100% is in the range of 15-30% of the portfolio - with more to come as house prices decline further - chart 28 is worth a look too - there is going to be a lot of loss content in some of the cells on that matrix)Click on graph for larger image in new window.
90+ day DQ's on their Alt-A book increased from 2.32% in Q1 to 3.72% in Q2!
They have $82B of uninsured 1st Lien subprime ABS, $65B of which is 06/07 vintage. The have $21B of ALT-A ABS.
On the credit enhancement question from before, for their guarantee portfolio as a whole, 18% has credit enhancement, but 92% of the loans with >90% LTV have enhancement, but only 16% of the Alt-A have it, only 14% of the IO loans have it, and 13% of option ARMs have it.
This graph from the Freddie investor's slides shows the default rates of Alt-As vs. the rest of the portfolio.
As we've been discussing, the 2nd wave of defaults it just starting, and Alt-A will be ground zero this time.
The second graph shows delinquencies by year, and shows the impact of the credit crunch.
Finally, Chart 32 is a great graphical depiction of moral hazard in action. It shows delinquencies by book year and 2006 is looking very good, but 2007 (on a relative basis) is off the charts because they caved to political pressure and took on all those crappy loans when the private label MBS market shut down.
Posted by Bill McBride on 8/06/2008 12:18:00 PM