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Non-conforming arrears rise to hit a record 23%

Arrears levels of non-conforming residential mortgage-backed securities rose to a record 23.31 per cent in the second quarter of this year, with Rooftop and GMAC-RFC seeing particu- larly big increases.

The Standard & Poor’s Ratings Services report reveals total arrears rose from 22.17 per cent in the first quarter to 23.31 per cent in the second quarter.

Three-month arrears rose to 12.12 per cent from 11.02 per cent in Q1 2008 and 10.11 per cent in Q2 2007.

The 2005 vintage RMBS, books have performed worse than any other but the 2006 and 2007 vintages are in line to perform even more poorly in the years to come, says S&P.

Particularly weak performances came from GMAC-RFC and Rooftop, which both saw three-month arrears rises of more than 20 per cent in their 2007 books this quarter.

Money Partners also performed badly, with books containing a high number of second-charge loans.

Vintage years for arrears

Change in total delinquencies from Q1 to Q2 2008 by vintage (%) 2003 2004 2005 2006 2007

Alba (Platform) 1.5 20.38 3.87Bluestone (Amber Homeloans) -0.67 13.67 2.55 14.88Eurosail (SPML) 6.59 3.01Kensington (Kensington) -7.08 -1.26 7.21 1.86 5.8

Leek (Platform) 1.28 2.41 16.66 14.37 9.62Marble Arch (Matlock Bank) 5.81 0.71 8.21Money Partners (Money Partners) 0.87 1.88Mortgages PLC (Mortgages PLC) 7.06 10.04Newgate (Mortgages 1) 12.2 5.25PRS (Preferred) -1.16 0.44 3.45RMAC (GMAC) 11.47 6.58 7.17 14.68 23.59Rooftop (Rooftop) 1.65 27 26.49SPS (SPML) 1.08 4.39 3.91Source: Standard & Poor’sPrime lenders also performed badly, in a separate S&P report, with Northern Rock’s Granite book accounting for one in every 13 repossessions in the UK.

HBOS also saw a sharp rise in its arrears.

S&P credit analyst Kate Livesey says: “With no sign of credit conditions easing and house prices continuing to fall, we expect delinquencies to continue rising and losses to increase over the coming quarters, which in turn will place some of the transactions in our index under further pressure.”

Hamptons managing director Jonathan Cornell says: “When many of these loans were originated, we were in a benign environment. We could not know how the mortgages would really perform. Now, in the wake of the credit crunch, we see the reality.

“The more recent books will be full of people with higher loan to value ratios, which, in turn, makes them less likely to meet their mortgage repayments, especially if they are in negative equity.”

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