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Sub-prime loans shift to fixed-rate products in first half of 2007

National Mortgage Professional
Mar 24, 2014

Sub-prime loans shift to fixed-rate products in first half of 2007MortgagePress.comMortgage Bankers Association, refinance, cash-out, adjustable-rate mortgage

The percentage of sub-prime 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 recently-published Mortgage Bankers Association's Sub-Prime Mortgage Originations Survey.

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 sub-prime originations were for refinance purposes, up from 55 percent in the second half of 2006. Among sub-prime refinances, 85 percent were for cash-out purposes, compared to 87 percent for the second half of 2006.
•Based on loan count, 32 percent of sub-prime purchase loans were made to a first-time homebuyer, unchanged from the second half of 2006.
•The average loan amount for sub-prime loans in the first half of 2007 was $185,109, 8.4 percent lower than the average loan amount for sub-prime loans of $202,295 in the second half of 2006.
•A majority, 58 percent, of sub-prime 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 ARMs) comprised 69 percent of sub-prime originations in the first half of 2007, versus an ARM share of 75 percent of sub-prime originations in the second half of 2006.
•Owner-occupied homes represented 95 percent of sub-prime 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 $15,809, a decrease from $35,506 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.

For more information, visit www.mortgagebankers.org.