Low rates have led to adverse selection and performance deterioration in 2005 subprime residential MBS while low loan-to-value ratios have limited the prepayment concern for other recent vintages, according to a new report from Fitch Solutions.

The company's monthly subprime RMBS index for the 2005 vintage dropped 11.4%. Managing director Thomas Aubrey said this reflects the fact that higher credit quality loans have been able to refinance out of the pool, leaving relatively poorer credit quality mortgages behind.

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