The foreclosure rate on subprime loans has risen considerably throughout 2007. In an effort to determine what type of subprime loans are contributing to the increase in delinquencies, the Federal Reserve Bank of New York analyzed a sampling of first lien mortgages.

Adjustable Rate Subprime Loans

According to the Bank's study, subprime mortgages with an adjustable rate had the highest rates of delinquency.

Source: Federal Reserve Bank of New York

One-third of the adjustable rate subprime loans sampled were delinquent. Thirteen percent were less than 60 days past due and 12 percent were delinquent by more than 60 days. Seven percent were already in foreclosure. The mean outstanding balance of adjustable rate subprime loans was $197,556.

Fixed Rate Subprime Loans

Fixed rate subprime loans are also contributing to higher than normal delinquency rates according to the Fed study.

Source: Federal Reserve Bank of New York

Six percent of fixed rate subprime mortgages were delinquent as of the end of August. Two percent were in foreclosure and four percent were bank-owned (REO). The mean outstanding balance of fixed rate subprime loans was $144,563.

Alt-A Loans

Alt-A subprime loans are impacting delinquency rates at a level just below fixed rate subprime mortgages.

Source: Federal Reserve Bank of New York

Four percent of fixed rate and adjustable rate Alt-A mortgage loans were delinquent as of the end of August. Three percent were in foreclosure and one percent was bank-owned. The mean outstanding loan balance was $224,819 on fixed rate Alt-A loans and $344,882 on adjustable rate Alt-A loans.

About the Fed Survey

Although the survey sampling does not represent all subprime loans, it does represent a sizable portion. The Federal Reserve took the sampling from the LoanPerformance ABS Loan Level Database, which includes data on all securitized subprime loans.

By most estimates, at least 75 percent of the subprime loans issued in 2006 were securitized. Since the majority of the loans in default were made in 2005 and 2006, the sampling used in the study provides a good estimate of the status of subprime loans within the U.S.