August remittance reports showed an 18 basis point (bps) improvement in annualized net losses, while early- (30-59 days) and late-stage (60-120 days) delinquencies moved less than 3 bps month-over-month (MoM) during the July collection period. However, net loss and delinquency rates moved higher on a year-over-year (YoY) basis, with the observed metrics reaching their highest levels in August since 2019—the year KBRA started tracking the index (see Figures 5-7). Meanwhile, recovery rates declined 44 bps MoM and 412 bps YoY (see Figure 9).
Notably, the YoY rise in annualized net losses was predominantly fueled by the addition of 2023 vintage transactions that have generally experienced higher defaults and lower recoveries relative to earlier vintage deals. Current index values, as well as MoM and YoY changes, are shown in the following table.
With existing home sales rising 1.3% in July, the period that corresponds to August remittance data, prepayment rates climbed 50 bps MoM. As…