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August subprime mortgage remittance report

August subprime mortgage remittance report concerning deals in the subprime ABX.HE index. Source: JPMorgan

60+ delinquencies continue to rise at an above average pace, but the
increases (while off the charts from a historic perspective) remain
consistent with the steep trajectory so far. Historically,
delinquencies reach a steady state at months 16-18, and then begin
to decline at around month 24 (on a prepay-adjusted basis).
Clearly, this trend will not apply for this vintage.

Prepayment-adjusted 60+ delinquencies (as % of original balance)
increased by 54bp, 78bp, 150bp and 193bp for ABX 06-1, 06-2, 07-1
and 07-2, respectively for the August reporting date (Charts 1 to
4). That is a larger increase versus last month for all but ABX.06-
2. The pace of increase remains extraordinarily high relative to
the seasoning, particularly on 07-2.

60+ delinquency rates continue to show significant tiering. In ABX-
07-1, average 60-day prepayment-adjusted delinquencies were at 9.2%,
but the low (CMLTI 06-WFH3 60+ at 6.5%), and high (MSAC 06-HE6 at
17.1%) differ by over 10 percentage points. That is reflected in
ABX.07-1.BBB- pricing in the low 30s, which indicates that a small
number of deals will avoid principal loss, using an assumed duration
of 2-3 years for the most junior tranches.

Prepayment-adjusted 30+ day delinquencies rose by 65bp, 77bp, 170bp
and 236bp for 06-1, 06-2, 07-1 and 07-2, respectively. New
delinquencies are easily keeping pace with any loans leaving the
pipeline via liquidation. The weakest deal in each index using 30+
delinquencies: MABS 05-NC2 (14.8%), SAIL 06-4 (19.5%) MSAC 06-HE6
(21.8%) and NHELI 07-2 (16.7%).