JPMorgan Doubles Prime-Jumbo Mortgage Loss Projection

By Jody Shenn Feb. 9 (Bloomberg) -- JPMorgan Chase & Co. analysts almost doubled their projections for losses on some prime-jumbo mortgages underlying securities, created at the start of the U.S. housing slump, because of soaring defaults. Losses on so-called hybrid adjustable-rate mortgages backing 2006 and 2007 prime-jumbo securities will reach 8 percent to 10 percent, according to a Feb. 6... [more]

By Jody Shenn Feb. 9 (Bloomberg) -- JPMorgan Chase & Co. analysts almost doubled their projections for losses on some prime-jumbo mortgages underlying securities, created at the start of the U.S. housing slump, because of soaring defaults. Losses on so-called hybrid adjustable-rate mortgages backing 2006 and 2007 prime-jumbo securities will reach 8 percent to 10 percent, according to a Feb. 6 report by New York-based analysts John Sim and Abhishek Mistry. “The pickup of defaults in prime during the second half of 2008 has caused us to nearly double our loss projections on prime hybrids,” the analysts wrote. Defaults on home loans not labeled as “subprime” that back “non-agency” mortgage securities, the debt that sparked the global financial-market meltdown, have soared as home prices continue to tumble and the U.S. recession deepens. The share of prime-jumbo mortgages at least 60 days late climbed 0.71 percentage point to 5.29 percent in the month covered by January bond reports, according to JPMorgan. About $500 billion of prime-jumbo bonds exist, according to Memphis, Tennessee-based FTN Financial. Jumbo loans are larger than what government-chartered Fannie Mae and Freddie Mac can buy or guarantee, currently $417,000 in most areas and as much as $625,500. Hybrid ARMs offer a few years of fixed interest rates, before switching to payments that vary with indexes. http://www.bloomberg.com/apps/news?pid=20601087&sid=aHd1M2bqYfUU&refer=home Good thing this doesn't affect Manhattan! [less]