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Serious delinquency rates on subprime mortgages are 10 times those on prime conventional mortgages and now exceed their previous high set in 2003. While the prime conventional mortgage delinquency rate has inched up slightly over the past 12 months, with adjustable-rate mortgages (ARMs) having a higher delinquency rate than fixed-rate mortgages, the overall delinquency rate remains historically low.
On the other hand, delinquency rates on subprime mortgages have increased rapidly and are expected to continue on this path for a while yet. Much of the deterioration in subprime loan performance is caused by ARM resets, but early payment defaults in more recent vintages are driving the fast increase in subprime delinquencies and an increase in mortgage fraud may also have been a contributing factor. Declining home values and stagnant home sales markets prevent many borrowers from selling their homes or from refinancing out of trouble. October 9, 2007
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