Monday, December 7, 2009

Bad Comparisons - MBA Edition

The MBA is out with their little delinquency chart that tells you nothing. It's like saying the apples at the corner market cost more than the steak at the butcher?!?! I know that they now disclaim as much, but why bother putting out a useless chart in the first place.

I'm not sure why they don't just put out a chart that compares, say, 60+ day delinquencies for each lender group. I've asked, and they claim not to have the data, which makes me wonder where they get the data from that they do have - any source should have both.


crabsofsteel said...

I don't think the chart is so bad although I wonder why they warn you that the rates are not comparable. If they are not comparable, why not, and why put them on the same graph?

However, the chart is also wrong. Freddie and to a much lesser extent Fannie has a huge exposure to multifamily deliquencies via their ownership of billions of MF-directed bonds (A1As). You can tell from the data that the MBA did not include those in their FH and FN data, and only direct loan exposure.

Dark Space said...

That's a good point on the agencies - just looking at US Multifamily in BBG using REDQ, 60+ are at 4.05%. This isn't completely fair b/c some of the worst MF offenders are not in the A1A class, but obviously its far above what the chart implies.

They're not comparable because they're putting 30+ delinquencies from one source next to 90+ delinquencies from another. So, CMBS "looks" worse than Banks & Thrifts, but in reality, the CMBS number is 30+ day delinquencies and Banks & Thrifts are 90+ day delinquencies.

If you use 90+ day delinquencies on CMBS the delinquency level is closer to 2.5% - substantially better than Banks and Thrifts. This is what you would expect too - most loans, regardless of underwriter, were using weaker underwriting standards in recent years compared to historical levels and the weak economy also impacts loans relatively equally, regardless of underwriter. So, term defaults should be up in all categories with some substantial level of correlation. Maturity defaults will impact Banks & Thrifts more, because most of their loans were shorter term than CMBS.

Anonymous said...

to include the agencies A1A exposure in the delinquency numbers seems a very arguably grey area, as the agencies are not exposed to any actual losses on the A1A class until overall deal level losses exceed ~30%.
this is very different than owning a whole loan and having it go delinquent and their exposure to an actual loss.