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Delinquencies Spark Prime Fears January 29, 2010

-- Olivia Thetgyi
Rising delinquencies in prime nonagency residential mortgage-backed securities have the market worried the sector could be next to fall. Problems have taken longer to show up in the sector, once considered the safest collateral, than in subprime. But continuing high unemployment and elevated levels of negative equity have taken their toll on borrowers, analysts said. In addition, a large overhang of mortgages that are due to start paying principal as well as interest threaten the bonds.
Performance has been deteriorating significantly in prime jumbo RMBS. Prime RMBS delinquent by 60 days or more rose to 9.2% in December 2009, up almost three times compared to the same period last year, noted analysts at Fitch Ratings. Delinquencies among the 2006- and 2007-vintages ...

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