Subprime Loans Shift to More Fixed Rate Products During the First Half of 2007
Dec 20, 2007
WASHINGTON, D.C. (December 20, 2007) – The percentage of subprime loans originated in the first half of 2007 that were fixed rate grew to 31 percent from 25 percent in the second half of 2006 according to the Mortgage Bankers Association's (MBA's) Subprime Mortgage Originations Survey released today.
Key findings from the survey include (unless otherwise noted, percentages are based on dollar volume of originated loans):
- For the first half of 2007, 64 percent of subprime originations were for refinance purposes, up from 55 percent in the second half of 2006. Among subprime refinances, 85 percent were for cashout purposes compared with 87 percent for the second half of 2006.
- Based on loan count, 32 percent of subprime purchase loans were made to a first-time homebuyer, unchanged from the second half of 2006.
- The average loan amount for subprime loans in the first half of 2007 was 5,109, 8.4 percent lower than the average loan amount for subprime loans of 2,295 in the second half of 2006.
- A majority, 58 percent, of subprime originations came through the broker channel in the first half of 2007, a decrease from 72 percent in the second half of 2006.
- Adjustable Rate Mortgage (ARM) loans (including Interest Only Adjustable Rate Mortgage Loans) comprised 69 percent of subprime originations in the first half of 2007, versus an Adjustable Rate Mortgage share of 75 percent of subprime originations in the second half of 2006.
- Owner occupied homes represented 95 percent of subprime originations in the first half of 2007 versus 93 percent in the second half of 2006.
- The average loan amount for second mortgages in this half was ,809, a decrease from ,506 in the second half of 2006. The decrease in the average loan amount along with the decline in the number of second mortgage originations was driven largely by a sharp decline in closed end loans.
This is the fourth report on subprime mortgage originations. The inaugural report covered subprime origination data from the second half of 2005.
An industry representative number of subprime companies participated in this survey. The subprime company information includes origination data from companies that originate at least 50 percent subprime or ones that were able to separately identify and report subprime originations.
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