FRB: Subprime Defaults Pass 23%

Defaults on securitized subprime mortgage loans jumped to 23.3% in December, up 200 basis points from the level of the previous month and more than double the 10.1% rate of a year earlier, according to a Friedman Billings Ramsey Investment Management report. The credit performance of private-label securities backed by subprime, alternative-A, and prime mortgages is "deteriorating more rapidly and more broadly than previously," said FBRIM managing director Michael Youngblood. He attributes the acceleration in defaults to "weakening labor market conditions and falling house prices." In the 25 metropolitan statistical areas with the highest default rates, the average unemployment rate was 6% and the MSAs had a net loss of 104,240 jobs over the previous year, according to the monthly credit performance report. Meanwhile, the default rate on alt-A loans rose to 7.2% in December, up 153 bps from that of the previous month and 555 bps from the rate in December 2006. (The default rate includes loans 90 days or more past due, loans in foreclosure, and real estate-owned.)