Although investors are requiring mortgage originators to repurchase more loans because of early payment defaults, the rise in repurchases does not signify a troubling trend, Fitch Ratings concludes in a special report. The report, published today, examines whether rising early payment defaults and loan repurchases are signs of a more serious credit crisis. After surveying an unspecified number of subprime residential lenders, Fitch analysts agreed with originators who maintain that repurchases are up primarily because investors have become more risk averse -- not because they made too many bad loans. While early payment defaults are on the rise in some regions and with certain types of loans, originators say, investors who purchase loans in the secondary market have become more insistent on enforcing agreements that require originators to repurchase loans that go into early default. "Although (early defaults) are the root cause of the increased repurchase activity, we do not believe...
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