The subprime RMBS from the 2005 vintage are turning into a puzzle for market professionals, because although the adjustable-rate loans are experiencing significant default rates, the fixed-rate deals have performed well. Out of all this confusion, however, lenders and issuers say the big picture offers ample opportunity for them to sustain business growth.
Based on an analysis of default rates of 18 subprime issuers as of April, defaults on adjustable-rate subprime RMBS stood at 2.73% in April, a 55% increase, said Michael Youngblood, managing director of ABS research for Friedman Billings Ramsey & Co. Meanwhile, the default rate on fixed-rate subprime RMBS was at 5.92% in April. Compared to prior years, the default rate dropped by 58 basis points, or 13%.