Reflecting the state of the whole U.S. mortgage market, scratch and dent loans are feeling the pressure of the lack of new issuance and dips in pricing. And with continued subprime deterioration, a pickup in the sector is not likely, market participants said.

The virtual lockdown on U.S. mortgage market issuance has affected all levels of the credit spectrum. "Most of the mortgage market has seized up as far as new issuance and it is affecting every sector as far up as prime loans," said Bernard Maas, vice president at DBRS.

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