by Calculated Risk on 2/02/2008 01:35:00 PM

Via Housing Wire: Fitch Places $139 Billion of Subprime RMBS on Negative Watch, Cites ‘Walk Aways’

It’s worth noting some of the language in Fitch’s press statement — because it’s the first time any of the rating agencies have lended credence to the idea that borrowers are walking away from their homes [emphasis added]:

In Fitch’s opinion the contraction in the mortgage markets has contributed to an acceleration and deepening of home price declines, and has eliminated the option to sell or refinance a home to avoid foreclosure for many borrowers. Additionally, the apparent willingness of borrowers to ‘walk away’ from mortgage debt has contributed to extraordinarily high levels of early default, which is particularly noticeable in the 2007 vintage mortgages. As Fitch has described in recent research reports, this behavior appears to be largely attributable to the use of high risk mortgage products such as ‘piggy-back’ second liens and stated-income documentation programs, which in many instances were poorly underwritten and susceptible to borrower/broker fraud.

A combination of falling prices (with millions of homeowners upside down on their homes), and changing social norms, could lead to staggering losses for lenders and investors.