S&P Says Subprime Credit Scores Drop

The average FICO score on subprime deals rated by Standard & Poor's in the second quarter declined to 623, the lowest average credit score reported since the fourth quarter of 2004.

S&P said the drop reflects a shift from interest-only loan products to 40-year loan products. The rating agency said FICO scores on IO loans remained "relatively constant," while the average score on 40-year loans declined. In the second quarter, the average FICO score on IO loans was 653, while the average for 40-year loans in S&P rated transactions was 624.

The share of 40-year loans in the S&P-rated universe rose to over 25% of issuance in the second quarter, up from over 15% in the first quarter. The IO share of subprime issuance fell to approximately 18% from 25%.

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