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Delinquency rates on many better quality US mortgages last month
outpaced those on the subprime loans that helped spark the US housing
crisis, Standard & Poor’s reports showed on Friday.

Total delinquencies on prime “jumbo” loans and “Alt-A” loans made in
2007 rose at a 7.3 per cent and 9.12 per cent rate, respectively, from
June, the rating company said. These loans require less proof of
repayment but were made to borrowers with credit scores above
subprime. For subprime loans, the rate of delinquency rose 7 per cent
last month.

Overall, delinquencies on 2007 prime jumbo loans rose to 3.22 per cent
in July, while Alt-A loan delinquencies increased to 14.56 per cent,
S&P said. Defaults on subprime loans from last year hit 31.25 per
cent.

The housing slump, now in its third year, has surprised many mortgage
companies, such as Freddie Mac, as its effects erode more creditworthy
loans. Potential downgrades to such loans, including top-rated ones,
have put mortgage bond markets further on edge in recent weeks as they
await rating company reviews, investors said.

S&P in late July increased its loss assumptions on many types of
mortgages, including doubling the projections for the Alt-A sector.
The company aims to complete reviews using its new assumptions “within
a few weeks, as opposed to a few months,” said Robert Pollsen, an
analyst at S&P in New York.

Delinquencies on loans made in 2006 exceed those of 2007, probably
because of the longer period from origination.“The more recent
vintages are suffering more performance related issues sooner, and to
a greater degree,” Pollsen said.

In a positive note for prime jumbo loans, serious delinquencies,
including loans more than 90 days past due, foreclosures and bank-
owned real estate, increased at a slower rate in July, Pollsen said.

http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG082508.html