Kroll Bond Rating Agency (KBRA) has announced the publication of a new report Mortgage Credit Trends: Freddie Mac vs. Prime Jumbo which analyzes Freddie Mac's historical performance data and considers the potential performance of risk-sharing reference pools reflecting current origination trends. KBRA also compares the credit performance of jumbo prime mortgages backing private label residential mortgage-backed securities (RMBS) to the credit performance of comparable Freddie Mac loans.
Key findings of our analysis are:
►Freddie Mac default and loss rates were much higher for vintages that experienced severe home price declines. The worst vintage was 2007, which experienced an estimated aggregate home price decline in excess of 18 percent with 12.3 percent of the original vintage balance liquidated to date.
►A rapid and significant improvement in credit characteristics sharply curtailed Freddie Mac mortgage liquidation rates, which fell from 8.3 percent for the 2008 vintage to 0.9 percent for the 2009 vintage.
►Current Freddie Mac originations continue to be of very high credit quality, with a weighted average (WA) FICO score of 767 and a WA combined loan-to-value ratio (CLTV) of 71 percent for the 2012 vintage.
►Credit performance of jumbo prime mortgages and Freddie Mac mortgages is highly comparable when controlling for characteristics such as FICO, LTV, balance, and income and asset documentation.