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New mortgage loan originations considered "subprime" are taking back their pre-crisis market share levels, according to the most recent economic letter by the Federal Reserve Bank of San Francisco. As the presence of private-label or non-agency securitization declined with the unfolding of the housing crisis, the market share of Ginnie Mae securitizations -- backed by Federal Housing Administration (FHA)-insured loans -- swelled. Since the middle of 2007, non-agency securitization and originations slipped, said San Francisco Fed economist John Krainer. Ginnie Mae, which bears the full faith and credit of the US government, stepped in to fill that gap as FHA activity soared. Ginnie's activity, inlcuding agency securitization by Freddie Mac (FRE) and Fannie Mae (FNM), the agencies own or gurarantee nearly 96% of new residential mortgage lending. Around 10% of originations in the San Francisco Fed's Q406 sample were labeled by originators as "subprime," according to Krainer. In the total US mortgage market, subprime loans accounted for about 20% of originations in 2006. Despite a nearly zero market share of subprime by Q108, Krainer said, increased FHA lending — identified in the securitization industry by Ginnie Mae's share — revived the subprime segment of the market. "After plummeting in early 2008, the share of borrowers with FICO credit scores lower than 660 has returned to just higher than 20%, the same share as when subprime securitization peaked in 2006," Krainer said. Write to Diana Golobay.

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