Rating agencies Standard & Poor's and Moody's Investors Service expect the 2006 book of subprime mortgages to perform well below the norm, but spokesmen for the firms say they don't believe problems on the lowest rung of the credit ladder will reach up to take a bite out of the prime and alternative-A sectors."The turmoil so far has been limited to the subprime space," S&P's Scott Mason said at the Mortgage Bankers Association's National Nonprime and Networking Conference in Carlsbad, Calif. "There will probably be some tightening in alt-A as well, but that's about it." David Teicher of Moody's agreed. Although early payment defaults have increased dramatically in the two sectors, he said, they are rising from general delinquency levels that are low by historical standards. Mr. Mason told the conference "there's a good probability" that vintage 2006 nonprime loans "will be one of the worst-performing in recent history." Mr. Teicher said that while it's still "too early to tell" how last year's subprime book will perform, it is more likely to play worse than better.

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