WaMu Alt-A Pool Revisited

About a month ago, in Evidence of "Walking Away" In WaMu Mortgage Pool, I wrote about a particular Washington Mutual (WM) Alt-A mortgage pool "affectionately" known as WMALT 2007-0C1 .

Many inquiring minds have been asking for an update of this pool. I am pleased to present a new screen shot of the same Alt-A pool. Once again, thanks go to "CS" for the screen shot.

New chart of WMALT 2007-0C1



click on chart for sharper image

The pool data just keeps getting uglier and uglier.

Month      REO     60+

10-2007   0.00%   11.53%

11-2007   0.04%   13.30%

12-2007   0.64%   16.83%

01-2008   1.83%   19.32%

02-2008   3.56%   22.69%

60 day delinquencies or greater has been rising at a nice steady pace of 2.5% to 3.5% or so every month since August 2007. The Real Estate Owned (REO) number is now a whopping 3.56% of the pool.

Inquiring minds may be asking about lines 7 and 8 as well as the GEO lines at the bottom of the screen shot.

• Line 7 is the sum of lines 3 through 6 (anything 60 days late or greater plus all previous foreclosures and REOs)
• Line 8 is the sum of lines 4 through 6 (anything 90 days late or greater plus all previous foreclosures and REOs).
• The GEO lines (geographic distribution) show this pool is 48% California and 14% Florida.

Cesspool Bottom Line

22.69% of a pool that was 92.6% rated AAA is 60 days delinquent or worse. 3.56% of that pool is REO. That's an amazing performance for an AAA pool whose issue date was May, 2007. At the current rate of progression it would not be surprising to see 30% of this pool get to REO status.

Repeating what I said last month....

Washington Mutual was the underwriter. If you bought a slice of this cesspool from WaMu, are you going to buy their next offering?

Comments

[User 168989:]

I am sick and tired from you guys serving your short interest and minipulating this stock. We all know the challenges this bank and many others are facing. There is no need to repeat publishing this info anytime it serves your or your customers' needs. Feel free to short as much as you like. Mark my words, you all shorts are going to pay the price. One day you are going to find out the situation is not as bad as you all being stating. Thus, The major financial institutions which own over 90% of this bank will make the stock price jumps much greater than your short price today. Then, I would like to know your feeling, comments or your reaction.

2008 Mar 27 12:11 PM

[bacgmail:]

The author either doesn't understand mortgages or is trying to mislead readers...take your pick but his comments are worthless. The "AAA" tranches of this pool have over 20% credit enhancement (he doesn't mention that fact). That means that the pool must expereince over 20% in losses (which is not the same as defaults) before the "AAA" rated bonds experience a single $ dollar in losses. Taking the author's assertion that "it would not be surprising to see 30% of this pool get to REO status", even a 50% severity rate would result in only 15% of losses for the pool. The more risky, lower rated subordinated bonds would absorb the losses...and the investors in these risky bonds knew (or should have known) the risks they were taking.

(BTW, severity rate is simply the amount of loss after you factor in the recovery from selling the house. For example, a $300,000 loan on a home sold in REO for $200,000 would have a severity of 33% ($100,000 loss divided by $300,000 loan).

2008 Mar 27 01:46 PM

[ssainvesting:]

Washington Mutual's current stock price is clearly noting the weakness' in WAMU's mortgage pools. There seems to be this overly redundant editorial commentary stating the obvious to a suspicious fault. The stock has already lost over 70% of it's value over the last 52 weeks because of the sub-prime crisis. Where was all of the negative press when the stock was trading over $45 a share 52 weeks ago?

The authors that persistently keep "beating this dead horse" to the ground should temper their typing fingers with the VALUE that WAMU currently presents...but they don't. Fear mongering seems to be the specialty of the day and presents a pathetic "sign of the times" from the editorial authors getting press. WAMU will make it through this very predictable correction in the Real Estate market as will most big banks. Investors are very fragile beings and make decisions based on fear more than they ought to. Negative Editorial pieces just exacerbate this fear but to paraphrase Warren Buffet, be fearful when people are greedy and greedy when people are fearful. I think WAMU is sitting in a pit of fear and is truly ripe for the picking. I do feel there is a greater chance of acquisition than not which bodes well for a closer to book value valuation when the time comes. I wouldn't "short" this stock at it's current value unless you're willing to lose $10 -$15 a share on news of a merger or acquisition.

Negative press is easy because hind sight is 20/20. If you want to impress me with your words of wisdom, try a negative piece when a stock is near it's 52 week high!

2008 Mar 27 01:50 PM

[siegfried:]

What institution holds this paper now? Is it a REIT or the Fed? How can that be tracked?

That would be good intel for the short side of this trade.

2008 Mar 27 03:42 PM

[charliebrown:]

I stick with WaMu; will go up big time when the bears forget to beat this horse for a second; then it will be too late...

2008 Mar 28 12:32 AM

[DSX Lover:]

This Paper is not going down because the seller is never going to sell it.
It is worth more that its market value. WAMU will make it with 16% of the FLow Short going long, makes it a better yield than U.S. Treasuries.

2008 Mar 28 02:13 AM

[ccerenzie:]

Interesting comments, but really folks, like it or not, this is relevant information that every investor should be aware of. It goes to the heart of one of the big problems in the market right now and it tells the story that the problem is getting worse, not better. Thanks for providing the info and please continue to do so. I'm not one for hiding information just because it is negative.

2008 Mar 28 10:08 AM

[cfish:]

The fed is probably holding all of this now. By the way, I'm not a bond trader, but 10% loss for AAA sounds kinda oxymoron to me.

2008 Mar 28 09:49 PM

[siegfried:]

if it was downgraded or put on watch list for downgrades by a ratings agency then it couldn't have been used as collateral for the Fed's unprecedented treasury--abs swap last week. who is holding this paper? still the investment banks? insurance companies? fixed income mutual funds?

2008 Mar 29 10:51 AM

[bondinvestor33:]

bacgmail's comments are correct and the AAA tranche is probably a good, safe buy at the current distressed prices in mortgages... also, this deal currently has nothing to do with WaMu and their stock price. The deal does not contain WaMu orignated loans but rather a conduit deal brought to the public markets by their capital markets group which no longer exists.

2008 Mar 30 02:11 PM