Fewer subprime borrowers rolled into new loans during the first month of this year compared with December, despite lower interest rates offered by mortgage companies, according to a Friedman Billings Ramsey & Co. report released last week.
The investment bank is anticipating the trend of slower prepayments to continue this month.
Also, default rates across all vintages of fixed and adjustable-rate subprime mortgage pools tracked by FBR increased in January, except for fixed-rate loans from the year 2000. The trend is expected to continue, as subprime loans originated last year and in 2004 begin to age. A number of investors are anticipating mortgages originated this year and in 2005 will perform poorly compared with earlier vintages because of an expected slowing trend in home price appreciation along with a perceived slackening of underwriting standards.
FBR is also anticipating higher default rates for loans backed by homes in areas of Louisiana, Mississippi and Massachusetts that have been impacted by weaker employment conditions.
Accredited posts lowest prepayment speeds
Accredited Home Lenders Inc. had the lowest average subprime loan prepayment rate compared to all other issuers tracked by FBR. The San Diego-based subprime lender's adjustable-rate loan pools issued from 2003 through 2005 prepayed slower than loans originated by other lenders, largely because their borrowers enjoyed some of the lowest interest rates.
Across the 2000 through 2005 adjustable-rate vintages, Accredited pools showed a 23.8% conditional prepayment rate as of January compared with an industry average of 34.3%. Also, Equity One Inc. loans showed the highest prepayment rate in January, compared with the 12 other lenders tracked by FBR. Equity One's four adjustable-rate loan pools averaged a 43.4% CPR as well as the highest weighted average coupon among the group - 9.2%.
Within the 2005 vintage, Fieldstone Mortgage Co. came in with a 16.2% CPR and a WAC of 7.2%. C-BASS LLC, however, had a CPR of 26.6% despite the lowest average WAC, 6.89%, among 2005 vintage floating-rate subprime pools. The high prepayment speed is likely a result of the type of collateral backing C-BASS deals, such as scratch and dent, reperforming and subperforming products. New Century Financial Corp. pools also averaged a 26.6% CPR, but had a higher 7.2% WAC. Countrywide Financial Corp.'s 2005 vintage had a 26.2% CPR while Ameriquest Mortgage Co. had a 26.7% CPR.
Aames, People's Choice show high default rates
Adjustable-rate loans in pools issued by Aames Investment Corp. in 2003 were only 81.9% current, compared with an industry average for the vintage of 86.4% as of January. The lender's 2004 and 2005 vintages have current rates of 90.9% and 94.3%, respectively, compared to averages of 91% and 94.9% for the 12 lenders tracked by FBR during those years. In 2003 and 2004, the weighted average FICO in Aames pools was 611 and 603. Numbers were not provided for 2005. Only 89.1% of People's Choice Home Loan Inc.'s 2004 vintage was current as of January, making it the worst performing of its competitors during that year. The lender, which only began securitizing in 2004, shaped up in 2005 with a 94.6% current rate, despite a lower average FICO than the previous year.
Accredited consistently had the largest portion of current accounts in its adjustable-rate loan pools from 2000 through 2005 vintages, according to FBR. The lender reported an average FICO in 2005 of 628 and averaged a 625 score from 2000 through 2005.
Fieldstone performed only second to Accredited within its 2004 and 2005 vintage pools, where it had current rates of 94.4% and 97.7%, respectively. The lender showed an improvement in loan performance from its 2003 vintage when it performed below the average of its peers with a current rate of 84.4%. Saxon Capital Inc.'s 2005 vintage pools showed an average 97.3% current rate as New Century came in slightly below with 96.6% of its loans current. Countrywide and Ameriquest had current rates of 95.36% and 96.5%, respectively, within the 2005 vintage.
The average FICO within adjustable-rate subprime loan pools of the 12 lenders tracked by FBR was 625 within the 2005 vintage compared with 624 in 2004, 618 in 2003 and 606 in 2002.
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