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U.S. Subprime Prices Down Nearly 6%: Fitch

Subprime is a word that's now ostracized within the industry, but the repercussions of the housing boom days when subprime loans were commonplace are still resounding.


Heightened concerns about the valuation of subprime assets backing U.S. residential mortgage-backed securities (RMBS) has manifested in an across-the-board drop for all vintages, ""Fitch Solutions"":http://www.fitchratings.com reported last week.


The ratings agency's U.S. Subprime RMBS Price Index fell by just under 6 percent month on month to 7.17 as of February 1, down from 7.62 as of January 1.

All vintages dropped in value, highlighting concerns about the valuation of all RMBS subprime assets. Driving the declines was the 2007 vintage, which dropped by 17.7 percent, followed by the 2005 vintage falling by 9.5 percent month on month.

Recent loan level analysis conducted by Fitch Solutions on the indices' constituents found that the 2007 vintage showed a significant jump in 90-day plus delinquencies rising from 13.7 percent to 14.2 percent.

""The rise in delinquencies is signaling a potential increase in 2007 loan defaults,"" explained Thomas Aubrey, managing director at Fitch Solutions.

Further evidence of a potential rise in defaults is in the six-month constant default rate (CDR) for both 2007 and 2005 vintages, both of which fell only marginally, the company said. Fitch explained that this is in stark contrast to much larger declines in the default rates of 2004 and 2006 vintages.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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