No, the AAA rates MBS did very well; 90% suffered no loses. It was the ABS CDOs (Asset Backed Security Colateralised Debt Obligations) that did badly.
Indeed the data you cite shows that it was Aaa rated CDOs that had default rates about 90%. CDOs were backed by mortgages as well.
Extending what you say about MBS to some more accurate statements, the AAA rated MBS had about a 9% or 10% default rate out to 4 years. There are 26 more years of life in those mortgages in which they can still default, going to an even higher cumulative default rate potentially.
No, the AAA rates MBS did very well; 90% suffered no loses. It was the ABS CDOs (Asset Backed Security Colateralised Debt Obligations) that did badly.
source: Why did so many people make ex post bad decisions
Indeed the data you cite shows that it was Aaa rated CDOs that had default rates about 90%. CDOs were backed by mortgages as well.
Extending what you say about MBS to some more accurate statements, the AAA rated MBS had about a 9% or 10% default rate out to 4 years. There are 26 more years of life in those mortgages in which they can still default, going to an even higher cumulative default rate potentially.
Characterizing a 9% default rate on triple-A securities as “did very well” is quite wrong. Historically, triple-A corporate bonds default at 0.6% or less rate, and triple-A municipals default at 0.00% rate. A 9% default rate 15 times higher than the ratings were intended to suggest. And the Baa MBS defaulted at over 80% rate, more than 15 times the ~5% rate on Baa Corporate bonds prior to 2007.
The ratings were CRAP, suggesting a default rate which should have been 1 to 2 orders of magnitude lower.
The ratings aren’t intra-class independent. Which is perfectly normal; junk corporate failures are correlated too.