As we continue to connect the dots from subprime to midprime, take a look at last night’s press release from Fulton Financial (fult). Seems its Resource Bank subsidiary is being forced to buy back first and second loans that were sold into the secondary market because the borrowers were defaulting early in the payment cycle. These early payment defaults are a common snafu in the subprime slime, but here’s the twist: For Fulton these 80/20 loans, otherwise known as mortgages with zero down payment, appear to be Alt-A, with credit scores above 620. The company says that in recent months Resource “has experienced an increase” in the rate of early payment defaults “primarily related to one specific product sold to one specific investor.” While the total number of loans isn’t significant, with Fulton taking a pre-tax loss of $5.5 million against its total assets of $15 billion, the trickle-up effect seems to be underway.
