Default Rates Appear to be Rising in Some Mortgage Pools

Default rates rose on prime and subprime mortgage pools tracked by Friedman Billings Ramsey in January, even as the number of defaults fell among alternative-A credit quality pools.

"We attribute the year-over-year gains in default rates to the natural aging of the stocks of prime, alt-A and subprime loans, layoffs by automobile manufacturers and related companies, weak labor market conditions in Massachusetts, and the impact of Hurricanes Katrina and Rita," FBR said in a report.

Those hurricanes affected the performance of loans in 12 metropolitan areas in Louisiana, Mississippi and Texas.

In January of this year, the default rate on subprime loans rose to 6.83%, from 6.03% a year earlier. The default rate fell in 112 metropolitan areas and rose in 219 metro areas, or 66.2% of the total, according to FBR.

On the positive side, FBR predicts that the default rate for subprime loans will not go any higher.

However, FBR has expanded its list of "chronically weak" metropolitan markets to 63 cities in 16 states. In these metro areas, default rates are "persistently high," FBR said.

(c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

Next in News ►