More first-time home buyers are using subprime loans

The percentage of subprime loans being used by first-time home buyers increased to 15 percent from 12 percent in the second half of 2006, according to the Mortgage Bankers Association’s Subprime Mortgage Originations Survey released earlier this month. The survey also found that the percentage of subprime loans used for repeat and first-time home purchases increased to 47 percent from 46 percent.

Other survey findings:

• For the second half of 2006, 55 percent of subprime originations were for refinancing, unchanged from the first half of 2006.

Among subprime refinances, 87 percent were for cash-out purposes compared with 75 percent for the first half of 2006. However, in the first half of 2006, the reasons for refinancing were reported as unknown or for other purposes, which means that refinances for cash-out purposes could be higher.

• Based on loan count, 32 percent of subprime purchase loans were made to a first-time home buyer, up from 25 percent in the first half of 2006.

• The average loan amount for subprime loans in the second half of 2006 was $202,295, only 1 percent higher than the average loan amount of $200,167 for subprime loans in the first half of 2006.

• Adjustable-rate loans, including interest-only ARMs, comprised 75 percent of subprime originations in the second half of 2006, versus an ARM share of 67 percent of subprime originations in the first half of 2006.

• Owner-occupied homes represented 93 percent of subprime originations in the second half of 2006 versus 92 percent in the first half of 2006.

• The average loan amount for second mortgages in this half was $35,506, an increase from $33,555 in the first half of 2006.

This is MBA’s third report on subprime mortgage originations, and responses came from 13 subprime lenders.