Fitch Solutions reported this week that its pricing index for subprime residential mortgage-backed securities (RMBS) originated in 2004 fell by 16.7 percent in November compared to just one month earlier.
Other vintages included in Fitch’s study, from 2005, 2006, and 2007, showed small gains on a month-to-month basis. The gains helped to temper Fitch’s total market subprime RMBS price index so that it recorded only a “marginal” decline, according to the firm.
While prices among recent vintage U.S. subprime RMBS continue to stabilize, 2004 is seeing a substantial drop-off in performance with no signs of improvement, Fitch said in its study.
At first glance these statistics may seem to paint the more recent vintages in a better light … showing “gains”, “stabilizing”, and other affirmative-sounding depictions. But Fitch says the reason its 2004 subprime price index is deteriorating is because the 2004 loans are higher quality.
Recent loan level analysis conducted by Fitch Solutions of the indices’ constituents revealed a significant uptick in the constant prepayment rate (CPR) of the 2004 vintage, meaning the credit-quality of a large number of these loans is