MAY 2004

Subprime Mortgage Delinquencies Fall

Recent data reported by the Mortgage Bankers Association (MBA) National Delinquency Survey show improvement in subprime mortgage loan performance. The charts below reveal that, as of the end of the fourth quarter 2003, the seasonally adjusted percent of subprime mortgage loan that were delinquent 60 days or more was 4.67%, down 59 basis points from the previous quarter, and down 70 basis points from the same quarter in 2002. The MBA has expanded the National Delinquency Survey to include more subprime loans. The fourth quarter 2003 survey included 3.1 million subprime loans, from a sufficiently large cross-section of the industry to be representative of the subprime market, according to the MBA. The National Delinquency Survey includes more than 37 million mortgage loans overall on 1-4 unit residential properties as reported by 140 mortgage bankers, commercial banks, savings banks, savings and loan associations and life insurance companies. The MBA attributed the improved performance to a stronger economy. The combined GDP growth in the 3rd and 4th quarters of 2003 was the best two-quarter performance in nearly 20 years. Continued strong economic growth will likely push the delinquency rate down further. However, the MBA warns that this favorable trend will be offset, to some degree, by the seasoning of recently originated loans. Delinquency rates usually peak for mortgages about 3-5 years into the life of the loan. The majority of loans in the survey were originated in the last 3 years.

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