Credit quality concerns are causing a drop in the issuance of asset- backed securities generally, and a change in the way subprime mortgage loans are being packaged for investors.

Through May 21, asset-backed issuance was off 19% from a year earlier, at $43.7 billion, according to Securities Data Co., and well below the pace analysts expected at the start of 1997.

"It's been much slower than most of us anticipated," said Jeffrey P. Salmon, head of asset-backed securities research at UBS Securities. The asset-backed market for subprime mortgages and home equity loans remains strong in terms of total issuance, analysts say. About $11.1 billion has been issued to date, compared with $8.9 billion a year ago. But the kinds of loans contained in these securitizations are changing, Mr. Salmon said.

Rising interest rates mean people with troubled credit are refinancing and borrowing less often against the equity in their homes. So to keep up with market demand for the securities, Wall Street is packaging better quality loans into the deals.

"Home equity securitizations are starting to more closely resemble pools of first mortgage loans," Mr. Salmon said.

While there is plenty of time for asset-backeds to pick up steam-much issuance occurs near the end of quarters-the slowdowns so far have been large enough to raise eyebrows.

The major reason for the change in the market, analysts say, is concern over credit quality.

One poster child for this concern is Jayhawk Acceptance Corp. A year ago the Dallas subprime lender was a part of the burgeoning market for subprime auto securities, issuing about $45 million in asset-backeds.

But the bloom fell off the rose when Jayhawk filed for bankruptcy in February. This week it reported a $5.8 million first-quarter loss.

Although the company's securitizations are insured against default by MBIA Insurance Corp., "most people discarded the company long ago," Mr. Salmon said, adding that investors have lost their appetite for new issuance from most subprime auto lenders.

Credit card securitizations, the cornerstone of the market, are showing the biggest slowdown of any asset class this year, said Thomas Zimmerman, asset-backed securities analyst at Prudential Securities.Credit card securitizations have dropped 48% from the year-ago level, to $11.5 billion, he said.

Such major issuers as Advanta Corp. have withdrawn from the market in light of rising losses in their portfolios. Mr. Zimmerman attributed the drop to investor nervousness with rising delinquency and chargeoff rates and to issuers offering fewer credit cards than in the past, so they have fewer receivables to securitize.

"The slowdown's not on the investor side; it's on the supply side," said a managing director at a large insurance company that frequently buys asset-backed securities.

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