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Subprime Mortgage Originations Volume Down in the First Half of 2006

October 23, 2006


Mortgage Bankers Association

WASHINGTON, D.C. (October 23, 2006) - First mortgage subprime originations volume decreased 30 percent in the first half of 2006 according to the Mortgage Bankers Association's (MBA's) Subprime Mortgage Originations Survey released today Key findings from the survey (percentages are based on dollar volume of originated loans):

Subprime first mortgage origination volume declined 30 percent in terms of both dollars and loan count from the second half of 2005 to the first half of 2006. Subprime loans made up 19 percent of all originations in the first half of 2006.

For the first half of 2006, 55 percent of subprime originations were for refinance purposes compared with 60 percent in the second half of 2005. Among subprime refinances, 75 percent were for cashout purposes compared with 88 percent for the second half of 2005.

Subprime loans for home purchases declined 25 percent between the second half of 2005 and the first half of 2006, whereas prime loans for home purchases declined only 6 percent during that same period.

Based on loan count, one in four subprime purchase loans was made to a first-time homebuyer.

The average loan amount for subprime loans in the first half of 2006 was $200,167; this is 7 percent higher than the average loan amount for subprime loans of $186,790 in the second half of 2005.

ARM loans (inc. IO ARMs) comprised 67 percent of subprime originations in the first half of 2006, versus an ARM share of 74 percent of subprime originations in the second half of 2005.

Regarding subprime second mortgages:

Subprime second mortgage originations declined 14 percent in dollar value from the second half of 2005 to the first half of 2006, but increased in number by 57 percent.

The average loan amount for second mortgages in this half was $33,555, a decline from $52,382 from the second half of 2005. The significant drop in the average loan amount along with the rise in the number of second mortgage originations was driven largely by a sharp increase in low balance stand alone HELOCs.

"In the context of a decelerating housing market and a slowing of overall mortgage originations activity, subprime mortgage originations slowed as well in the first half of 2006," said Doug Duncan, MBA's chief economist and senior vice president of research and business development. "Consumers respond to changing opportunities in the marketplace, but it looks like these products serve an important need. In particular, one in four subprime purchase loans was made to a first-time homebuyer during this time period."

This is the second report on subprime mortgage originations. The inaugural report covered subprime origination data from the second half of 2005. More than 25 companies participated in this survey, including most of the top 10 subprime originators. The origination data is from companies that originate at least 50 percent subprime or ones that could break out their subprime originations separately.





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