The average subprime mortgage rate was 7.73% last week, representing a nine basis point drop from the average in January but still higher than levels seen last summer, according to JPMorgan Securities Inc.
"The competition no doubt will hurt subprime lenders' margins, and a cost-cutting strategy is needed to maintain profits," JPMorgan analysts wrote last week.
Investors have begun to express concern regarding what cost-cutting measures will occur at subprime mortgage companies. While Countrywide Financial Corp. said it may reduce the number of brokers it employs this year because of lower than expected loan volumes, investors have pointed out that others may opt to reduce servicing staffs.
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