Newly securitized jumbo mortgages are performing very well, according to a new report.
Following the mortgage meltdown, there were few issuances of private-label residential mortgage-backed securities for jumbo loans.
But one company, Redwood Trust Inc., managed to issue five transactions with 1,800 jumbo mortgages since the beginning of 2010.
And just one of those loans is delinquent thus far, according to Fitch Ratings. That loan is expected to be resolved quickly due to its 50 percent loan-to-value ratio.
The few loans from the five issuances that have missed any payments were likely to due delays in pending refinances or confusion over the application of a curtailment payment.
Fitch noted that all of the underlying loans have high credit quality.
But the low-rate environment has prompted faster repayment than initially expected. Three-quarters of the loans issued in 2010 have paid in full so far, while 30 percent of the 2011 issuances have repaid in full.
“The relatively fast prepayments have modestly affected the composition of the credit attributes in the remaining mortgage pools,” the report said. “Relative to the initial pools, remaining borrowers have smaller loan amounts, lower credit scores and higher LTVs. However, all compositional changes have been relatively minor to date.
“As such, Fitch does not believe that the prepayments have resulted in a material change in credit risk in the remaining pools thus far.”
But the ratings agency does see some adverse selection in the remaining pools if prepayment continues at a rapid pace, though structural features should mitigate the risk.
