April 7, 2010 / 5:42 PM / 8 years ago

US subprime delinquencies drop 1st time in 4 years

NEW YORK, April 7 (Reuters) - Late payments on U.S. subprime mortgages fell in March for the first time in four years while defaults on prime home loans kept escalating to top 10 percent for jumbo loans, Fitch Ratings said on Wednesday.

Seriously delinquent loans remained elevated across loan types, however, with the U.S. unemployment rate hovering just below 10 percent and government efforts to stem foreclosures keeping more struggling borrowers late paying rather than failing on their loans.

Major U.S. mortgage finance sources Fannie Mae FNM.N and Freddie Mac FRE.N have targeted up to $200 billion of loans that are at least 120 days delinquent and have been repurchasing them out of securities pools to preserve capital.

Starting their rise in the second quarter of 2007, overall delinquencies on prime residential mortgage-backed securities (RMBS) nearly tripled in 2009 and are already up 90 basis points this year, Fitch said in a statement.

Prime jumbo RMBS 60-plus days delinquencies rose to 10.1 percent in March from 9.9 percent in February and 4.8 percent a year earlier.

Mortgage defaults first spiraled up on subprime loans, based on lax lending to many high-risk borrowers. As unemployment marched up to double digits, borrowers with better credit started to default in mounting numbers and home-loan foreclosures spiked to record highs last year.

Subprime RMBS delinquencies fell to 46.3 percent in March from 46.9 percent in February, but stayed well above 39.8 percent from a year ago, Fitch said. These delinquencies rose dramatically for 44 months from a low point of 6.2 percent in June 2006.

“The improvement in subprime delinquencies may be nothing more than a seasonal anomaly of tax refunds being utilized to help borrowers catch up on late mortgage payments,” Fitch Managing Director Vincent Barberio said in the statement.

However, the roll rate -- or the pace of performing loans turning delinquent -- fell significantly to the lowest in over two years, he noted, adding: “An increase in loan modification activity also contributed favorably.”

The five states with the highest volume of prime jumbo loans outstanding -- California, New York, Florida, Virginia, and New Jersey -- represented about two-thirds of the total sector.

Prime jumbo RMBS 60-plus days delinquencies for these states at March 2010 versus February, and their approximate share of the estimated $371 billion market, were as follows:

--California: 11.8 percent, up from 11.6 percent (44 percent share);

--New York: 6.7 percent, up from 6.3 percent (7 percent share);

--Florida: 17.5 percent, up from 17 percent (6 percent share);

--Virginia: 5.8 percent, up from 5.7 percent (5 percent share);

--New Jersey: 8.2 percent, up from 7.9 percent (4 percent share). (Reporting by Lynn Adler; Editing by James Dalgleish)

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