The position of this blog has been stated several times. Subprime credit is a pig-in-the-python. It got bad very quickly – and it will get better very quickly. The losses on some pools (particularly loans originated in early 2007) will look implausibly large – but 2005 pools will be much tamer.
Prime credit by contrast is deteriorating at an increasing rate and there is no obvious end in sight. It is not able to be modelled. It is very scary.The thinking behind that is detailed here and here.
Wish it were so simple. The prime credit is looking every bit as bad as all that. But the trend in subprime credit is also less clear than a month ago. In some pools (not all) the trends are less good. Short dated delinquency is rising in some places. Losses look a little larger than they might have looked a month ago. The improvement trend was three months old. And one month does not a cycle make – but my level of comfort is falling.