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Mixed Subprime Activity

Mixed Subprime ActivityFBR report indicates April rise in ARM delinquencies

May 24, 2007


The performance of subprime loans backing residential mortgage-backed securities with variable interest rates worsened, according to a recent investment report. But spreads improved on new transactions for the fifth consecutive week.

Delinquency on 2006 adjustable-rate subprime originations jumped to 7.40 percent in April, while the default rate on 2007 originations nudged higher to 0.62 percent, according to Structured Finance Insights from FBR Investment Management Inc.

For all subprime adjustable-rate mortgages, which included vintages from 2000 to 2007, the default rate was up 0.5 percent to 8.06 percent — up 4.2 percent from a year earlier, the report indicated.

Fixed rate performance was mixed, with the 2006 vintage rising to 3.84 percent and the 2007 vintage edging up to 0.15 percent, FBR said. For all fixed-rate transactions, delinquency declined 0.1 percent from March to 6.96 percent and was up 1.0 percent from April 2006.

Subprime RMBS spreads to one-month LIBOR tightened for the fifth consecutive week, the report said.

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