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...But Subprime Problems Persist.(Statistical data)
WASHINGTON -- Default rates on subprime loans are rising as poor job markets in the Midwest and New England have taken their toll on loan performance while default rates in the hurricane-impacted states remain at elevated levels. In addition, newly originated subprime loans are exhibiting especially high early default rates.
Default rates on subprime mortgage-backed securities jumped from 6.9% in June to 9.1% in October, according to researchers at Friedman Billings Ramsey.
Many Midwestern cities are still feeling the effects of layoffs by automobile manufacturers and parts suppliers over the past two years. In Detroit, defaults have increased from 15% in October 2005 to 22% as of Oct. 30, 2006.
Meanwhile, default rates in New England have surged. Boston has seen default rates jump from 5.9% in October 2005 to 11.7% in October of last year.
"Job growth went to zero in 2005 and did not rebound," said FBR managing director Michael Youngblood. So the increase in defaults was anticipated, he said. (Default rates include loans that are 90 days or more past due, foreclosures and real estate-owned.)
What is "surprising" is that default rates in the Gulf Coast states, which are still recovering from the 2005 hurricanes, have to come down further, Mr. Youngblood said.
The subprime default rate in New Orleans was 9% in August 2005 just before Hurricane Katrina hit and flooded the city. It jumped to 49% by December 2005 and crested. After trending down to 23.4% in September, the improvement ...
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Source: HighBeam Research, ...But Subprime Problems Persist.(Statistical data)