Moody's Sees Fewer Subprime Problems

Early chargeoffs and serious delinquencies on home equity mortgage pools fell significantly after the first quarter, according to Moody's Investors Service, and the rating agency attributes the improvement to high issuance volume and improved subprime performance.In the latest update of the Moody's home equity index, analyst Henry Engelken said high issuance volume tends to "push down aggregate chargeoff and delinquency rates because newly securitized mortgage pools suffer few losses and serious delinquencies early in their lives." Because of refinancing and heavy issuance this year and last, subprime mortgage pools securitized in 2001 and 2002 now constitute more than half of the mortgages included in the Moody's Home Equity Index. Through August 2002, some $80.5 billion of subprime mortgage-backed securities had been issued this year. Moreover, this year's loans have "significantly outperformed previous vintage pools with the same seasoning," Moody's said. Pools securitized in the first quarter of 2002 have a serious delinquency rate that is only half the rate experienced on pools issued in the prior three quarters at a similar point in their life cycle. Moody's can be found online at http://www.moodys.com.