The refinancing waves seen over the last year have provided issuers with enough collateral to more efficiently pool their loans, pushing up FICO levels and lowering loan-to-value ratios in prime pools, analysts said. Alt-A pools have remained consistent.

In the most recent edition of Trends in Residential Mortgage Products, Standard & Poor's said that the average FICO scores for the first quarter of 2002 inched up slightly from previous quarters.

According to the report, the average FICO score for the 30-year, fixed-rate pools went up to 730, which is the highest number observed since the third quarter of 2001. More significantly, average LTV ratios went down to 69.07%, a level not seen since the series of Trends reports began in 1998. This is compared to 70.57% in the fourth quarter and 71.43% in third quarter of last year.

"The effect of the refis over the last two quarters has really contributed to where our LTVs and FICO scores have been," said Martin Kennedy, an analyst at S&P. "The ability of issuers to carve their portfolios into what would be prime originations into two separate types of transactions benefited the jumbo markets and also led to where our Alt-A markets have been."

Aside from the fact that Alt-A pools contain loans with higher LTVs compared to jumbo collateral, there are differences in documentation, ownership type, and other factors that define the loan as an Alt-A. Analysts at S&P said these are the reasons why, in contrast to the report for prime issuers, the levels reported over the past few quarters in the Alt-A Trends report have been fairly consistent.

However, the rating agency did see some slight decreases in the numbers for the first quarter of this year. According to the report, the average FICO score for the set of 11 30-year, fixed-rate Alt-A transactions was 700, slightly lower than the 702 average in the fourth quarter and 701 for the third quarter of 2001. The average LTV ratio for these pools was 76.37%, which is similar to the 76.77% and the 76% ratio in the two preceding quarters.

Other significant results

Other highlights of the report came from the high-CLTV and HELOC sectors. According to S&P, the second-lien high-CLTV (125%) volume in the first quarter of this year is significantly less than the same period last year. First quarter 2002 securitization volume was just $775 million (represents two deals) compared to 2001's volume of $3.659 billion (comprising eight deals).

In HELOCs, the first quarter volume (four transactions amounting to $3.867 billion) tripled compared to the same period in 2001 ($1.129 billion consisting of two transactions). The significant increase resulted from Countrywide's securitization of three deals in the first quarter, which was record breaking for the firm.

Analysts also said that going forward, there is a possibility that firms that originate HELOCs purely through the Internet might be bringing securitizations to market. Big issuers like GMAC and Countrywide have Internet-based programs, but companies like Deep Green originate this type of loan solely via the Web.

The S&P report also looked at subprime and CES Less-Than-100% CLTV Issuers.

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