Amid the flap over Standard & Poor’s decision to reverse its ratings on CMBS transactions, we almost missed this: the rating agency has once again revised upward its projections for losses on subprime mortgages.
From the statement, emphasis ours:
July 22 - Standard & Poor’s Ratings Services today provided its revised loss projections for U.S. residential mortgage-backed securities (RMBS) transactions backed by subprime collateral issued in 2005, 2006, and 2007. These loss projections are for the collateral underlying these transactions.
The weighted average projected loss for the 2005 vintage transactions is approximately 14.00% of the original pool balance. The 2005 loss projections range from 2.98% to 35.94%. The weighted average projected loss for the 2006 transactions is approximately 32.00%. The 2006 loss projections range from 4.71% to 59.34%. The weighted average projected loss for the 2007 transactions is approximately 40.00%. The 2007 loss projections range from 5.12% to 66.70%.
For context, S&P projected in February that losses on loans backing 2006 securities would reach an average of about 25 per cent and for 2007 loans, 31 per cent.
As analysts at BNP Paribas put it in a note on Thursday:
This merely confirms what we are saying all along that subprime housing related losses continue to increase that will continue to drive bank losses higher. From our perspective, we believe that is it too early to call for the end of the housing story especially given the continued increases in foreclosures.
Related links:
Citi subprime snapshot - FT Alphaville
Curse of the underwriters - FT Alphaville
HSBC hates subprime - FT Alphaville
