FBR: Subprime Defaults Surge to Record High

The default rate on subprime mortgage loans jumped nearly 160 basis points in September to a new record high of 17.73%, and the foreclosure rate jumped 47 bps to 7.24%, according to a Friedman Billings Ramsey Investment Management report.Defaults on securitized subprime mortgages had doubled over the previous 12 months. For the first time since the 2001 recession, "the majority of metropolitan statistical areas are experiencing year over year increases in default rates in each of prime, Alt-A and subprime loans," Michael Youngblood, FBRIM's managing director of fixed-income research, says in the report. The researcher points out that default rates in 52 MSAs, representing 46% of all subprime loans, had increased by 200% or more in September 2007 from the levels of a year earlier. The 52 MSAs are concentrated in Arizona, California, Florida, Nevada, Oregon, and the District of Columbia. The default rate on alternative-A loans moved up from 3.96% in August to 4.61% in September. FBRIM is a subsidiary of Friedman Billings Ramsey, which can be found online at http://www.fbr.com.