Fitch: Home Prices Flat for '06 B&C Mortgages

Home prices were virtually unchanged for 2006 subprime mortgages even as subprime defaults rose to double-digit levels, according to a new report by Fitch Ratings.Fitch analyzed the default rates (defined as the sum of 90-day-plus delinquency, foreclosure, real-estate-owned, and bankruptcy rates) of loans originated from 2002 through 2006 and the cumulative rate of home price inflation after origination. By weighting home prices based on the amount of subprime loans in each metropolitan statistical area, Fitch was able to create a more accurate picture of HPI levels in areas where subprime mortgages are concentrated, the rating agency said. The analysis showed that subprime loans originated in the first quarter of 2006 have experienced only 0.5% of home price inflation after 12 months, but that defaults have jumped to 8.3% of outstanding mortgage balances. "This contrasts starkly to 2005 full-year originations, which experienced average HPI of 17% after 12 months and very low defaults of 1.7%," said managing director Glenn Costello. The report is titled "Examining Home Price Inflation and Residential Mortgage Default Rates." Fitch can be found online at http://www.fitchratings.com.