Fitch Ratings has announced that it will adjust its treatment of interest-only affordability features on two- and three-year subprime hybrid adjustable-rate mortgages to reflect higher odds of default.Fitch analyzed the payment shock potential for 2005 subprime IO and non-IO ARMs and found that the payment increase for an IO at the rate reset is "significantly larger than the increase from principal amortization and is high even if rates do not rise due to the high margins and low initial rates." The credit performance of subprime IOs has been strong due to a favorable economic climate, but newer vintages "may not exhibit the same strong performance because more borrowers could face a payment increase as home price appreciation slows," said Fitch director Grant Bailey. Subprime borrowers are sensitive to the rate of home price appreciation because they tend to use accumulated home equity to pay off additional debt to lower their debt-to-income ratio. "If their DTI is too high to qualify for a new mortgage before the rate reset, they become vulnerable to payment shock risk," Mr. Bailey said. The report, "Rating Subprime RMBS Backed by Interest-Only ARMs," is available on Fitch's website at http://www.fitchratings.com.
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A federal judge in Texas dismissed the Consumer Financial Protection Bureau's medical debt rule and prohibited states from passing their own laws prohibiting medical debt on credit reports.
7h ago -
Dr. Mark Calabria takes on the additional role of chief statistician of the United States; retired Ally Bank executive Diane Morais has joined First Citizens Bancshares' board of directors; MainStreet Bank has promoted Alex Vari to chief financial officer; and more in this week's banking news roundup.
10h ago -
While refinances are behind the latest increases, the pace of purchase activity may be a stronger indicator of where the housing market sits.
July 11 -
The share of economists expecting a September rate reduction grew in the July Wolters Kluwer survey, but the October or later percentage also increased.
July 11 -
Rising home prices and softening sales offer a mixed view of a market that some say is shifting to favor buyers.
July 11 -
The notes are backed by home improvement installment loans originated by approved dealers in Foundation Finance Company's network.
July 11