Low-documentation loans made in 1995 are showing slightly lower rates of serious delinquency than fully documented mortgages, according to new figures from Mortgage Information Corp., San Francisco.
The rate on low-doc loans originated in 1995 was 0.49%, against 0.55% for full-documentation mortgages.
Low-doc loans made in 1994 and 1993 also showed lower serious delinquencies than other loans. But fully documented loans made before 1993 performed better. And when all vintages are combined, loans with full documentation performed significantly better.
Why the stronger performance for recent low-doc loans?
Mortgage Information said in its report that loan-to-value ratios were one factor. Low-doc loans usually require larger down payments and thus have lower ratios than other loans.
Also, loans with limited documentation have become less common in recent years, an indication that lenders may have become more selective in granting such credit.
Mortgage Information also said 30-day and 90-day delinquencies as of Sept. 30 on conventional loans made last year were substantially lower than on loans made in 1995 at the same stage in their seasoning.
The 30-day rate for the 1996 vintage is 0.94%, against 1.27% for the 1995 vintage-the highest in recent years.
Loans made during the refi boom of 1992 and 1993, which are likely to carry low interest rates, showed very small 30-day latenesses, both 0.34%.
Meanwhile, prepayment speeds-closely watched by investors in mortgage securities-slowed in last year's third quarter to their lowest level since the middle of 1995, Mortgage Information reported.
But the report added that there were sharp rises in prepayment speeds in some metropolitan areas. It noted that such increases are often associated with a pickup in the area's housing market.
San Francisco and San Jose in Northern California were in the top 10 in prepayment speeds throughout the first nine months. But Fairfield County in Connecticut, a bedroom suburb of New York City, had the fastest speeds in the nation in the third quarter after showing only average speeds in the first quarter.