S&P Increases 2005-07 Subprime and Alt-A Loss Assumptions

by: Research Recap

Standard & Poor’s has increased its loss assumptions for projected losses for U.S. residential mortgage-backed securities (RMBS) transactions backed by subprime and Alternative-A (Alt-A) collateral issued in 2005, 2006, and 2007. “We are updating all of our 2005, 2006, and 2007 deal-specific subprime default projections. In aggregate, our remaining 2005, 2006, and 2007 default projections, as a percentage of the original pool balances, are approximately 11%, 30%, and 49%, respectively. As a result of our increased default and loss severity estimates, we are raising our 2005, 2006, and 2007 vintage subprime and Alt-A lifetime loss projections.”

We are raising our remaining 2005, 2006, and 2007 Alt-A and subprime loss severity assumptions to reflect additional market value declines and the increasing inventory of real estate-owned properties.

The changes affect the projected losses on the collateral securing outstanding subprime transactions as follows:

  • 2005 vintage losses have increased to approximately 14.00% from approximately 10.50%;
  • 2006 vintage losses have increased to approximately 32.00% from approximately 25.00%; and
  • 2007 vintage losses have increased to approximately 40.00% from approximately 31.00%.

The changes affect the projected losses on the collateral securing outstanding Alt-A transactions as follows:

  • 2005 vintage losses have increased to 10.00% from 7.75%;
  • 2006 vintage losses have increased to roughly 22.50% from 17.30%; and
  • 2007 vintage losses have increased to approximately 27.00% from 21.00%.

For details, see: Standard & Poor’s Revises U.S. Subprime And Alternative-A RMBS Loss Assumptions For Transactions Issued In 2005, 2006, And 2007.