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Sub-prime default rate almost doubled in June, report shows

August 25, 2007|From Bloomberg News

The default rate on sub-prime mortgages packaged into securities almost doubled to a record 13.43% in June from a year earlier, according to a report issued Friday.

The share of loans that were at least 90 days late, in foreclosure or on property that had been seized rose from 12.4% in May and 6.88% in June 2006, according to the report by Michael Youngblood, an analyst at securities firm Friedman, Billings, Ramsey Group Inc.

The default rate for alt-A mortgages packaged into bonds climbed to a record 3% from 2.69% in May and 0.94% in June 2006, according to Youngblood, who made use of data from First American Corp.'s LoanPerformance unit.

Sub-prime loans are made to borrowers with poor credit or high debt. Alt-A is a credit class above sub-prime. Alt-A mortgages are often used by consumers who don't document their pay or those who buy investment properties.

The default rate for prime "jumbo" mortgages -- large loans given to people with good credit -- rose to 0.38% from 0.37% in May and 0.23% a year earlier.

Youngblood's data go back to June 1992. Sales of mortgage bonds without guarantees by government-chartered companies Fannie Mae and Freddie Mac or by government agency Ginnie Mae began in 1997.

Late payments on all U.S. mortgages rose to 4.84% on March 31 from 4.41% a year earlier, according to the Washington-based Mortgage Bankers Assn.

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