Clayton: ARM Overdues Preceding Rate Resets

A study by Clayton Holdings, an analytics and due diligence firm, has found that 70% of subprime adjustable-rate mortgages that are in default went into delinquency before borrowers faced rate resets on their monthly payments. The analysis of loans tracked by Clayton suggests that, despite all the attention to rate resets, deeper "systemic market failures" are primarily responsible for the poor performance, the company said. Clayton's June early performance snapshot of residential mortgage-backed securities also found that loans originated in 2006 remain the poorest-performing recent vintage. Regionally, the South and West now have the highest rate of delinquent subprime ARMs rolling into foreclosure, Clayton said. The company, based in Shelton, Conn., can be found online at http://www.clayton.com.