Majority of 06 – 07 mortgages under water
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Fitch Ratings says that 60% of remaining performing borrowers within ‘06- and ‘07-vintage residential mortgage-backed securities (RMBS) bear negative home equity, meaning they owe more than their houses are worth, and all that negative equity is hampering sustained improvement in RMBS performance.
The rate of borrowers rolling into delinquency status showed “notable improvement” in the first half of 2009 and stabilized during the summer at an elevated level, but “increased modestly” in September, Fitch said. The rating agency expects US unemployment to peak at 10.3% in the middle of next year, further pressuring current borrowers.
House prices will ultimately decline another 10% over the next year. “Home price figures in recent months were temporarily helped by the reduced share of distressed property liquidations due to foreclosure moratoriums and servicers’ increased efforts to qualify borrowers for modifications,” Fitch said. “However, the number of distressed borrowers has continued to grow.”
