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Subprime loans issued in 2004 and earlier possess a higher percentage of better quality re-performing loans when compared to 2006 and 2007 vintages, Amherst Securities said in its latest mortgage insight report.
The point of the survey is to remind the market that there's a need to differentiate between the collateral characteristics of subprime loans issued in different years.
Amherst said seasoned subprime loan pools have a higher percentage of performing loans with equity attached. Subprime homeowners who acquired property in 2004 or before only share one characteristic with loans in later pools — low FICO scores.
On all other measures, including loan-to-value ratios and total loan amount, older subprime loans generally meet higher quality underwriting criteria.
Subprime loans written in 2004 and earlier averaged $110,000, compared to $159,000 and $188,000 in 2006 and 2007, respectively. The larger loans came as home prices peaked in 2006. Seasoned subprime borrowers also put more equity into their homes with LTV generally at 79% on 2004 subprime loans, compared to 81% on 2006 and 2007 mortgages.
Seasoned subprime borrowers also are less likely to have second mortgages. When looking at only payment performance, older subprime loans are generally doing better.
In 2004 and earlier vintages, about 18% of the remaining loan balances are more than six-months delinquent. For loans from 2006 and 2007, the six-month delinquency rate is 36%.
Subprime loans issued in 2006 and 2007 were concentrated in California, Arizona, Nevada and Florida where home-price depreciation kicked in dramatically after the housing market crash.
"For instance, 2004 and earlier vintages have 27% in Sand States, while 2006–2007 vintages have 39%," Amherst Securities said. "These two effects have resulted in much lower mark-to-mark LTV and CLTV (at 79% and 87%, respectively) for the 2004 and earlier cohorts, while those metrics are much higher (125% and 141%, respectively) for the 2006–2007 cohorts."
Write to Kerri Panchuk.
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