FBR: '06 Subprime ARM Defaults Jump

The default rate on subprime adjustable-rate mortgages originated in 2006 "rose briskly" to 7.4% in April, according to a Friedman Billings Ramsey report.Researchers at the investment banking firm based in Alexandria, Va., said the default rate on subprime ARMs had jumped 16.4% since March. Meanwhile, the default rate on subprime ARMs originated in 2005 increased by 5%, to 9.8%, in April. "In comparison to previous origination years, the default rates of the 2005 and 2006 origination years deteriorated considerably faster than the 2002-2004 origination years," the FBR researchers said. (Default rates include loans that are 90 days or more past due, in foreclosure, or real estate owned.) The report also shows that the default rate on fixed-rate subprime product originated in 2006 edged up to 3.5% in April. But the default rate of 2005 fixed-rate product actually declined slightly to 6.8%. Looking at all securitized subprime mortgages, the default rate hit 11.4% in February, according to a previous FBR report.