Mortgage production in the subprime market dropped substantially in the third quarter. But the sector appeared to be holding up better than the prime market. Clearly, the production story for subprime lenders hasn’t been all bad. On a yearly basis, Inside B&C Lending estimates that originations rose a solid 68.5 percent, to $387.6 billion, during the first nine months of 2004. But on a quarterly basis, the tale was different: volume dropped by 8.8…