Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Mortgage Defaults Start to Spread
Wall Street Journal ^ | 1 March 2007 | RUTH SIMON and JAMES R. HAGERTY

Posted on 03/01/2007 5:10:38 AM PST by shrinkermd

The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.

At issue are mortgages made to people who fall in the gray area between "prime" (borrowers considered the best credit risks) and "subprime" (borrowers considered the greatest credit risks). A record $400 billion of these midlevel loans -- which are known in the industry as "Alt-A" mortgages -- were originated last year, up from $85 billion in 2003, according to Inside Mortgage Finance, a trade publication. Alt-A loans accounted for roughly 16% of mortgage originations last year and subprime loans an additional 24%.

The catch-all Alt-A category includes many of the innovative products that helped fuel the housing boom, such as mortgages that carry little, if any, documentation of income or assets, and so-called option adjustable-rate mortgages, which give borrowers multiple payment choices but can lead to a rising loan balance. Loans taken by investors buying homes they don't plan to occupy themselves can also fall into the Alt-A category.

... Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months. "The credit deterioration has been almost parallel to what's been happening in the subprime market," says UBS mortgage analyst David Liu. The UBS report contrasts with testimony Federal Reserve Board Chairman Ben Bernanke gave to Congress yesterday. "Our assessment is that there's not much indication that subprime issues have spread into the broader mortgage market," Mr. Bernanke said.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Extended News
KEYWORDS: defaults; housing; mortgages; outcome
Navigation: use the links below to view more comments.
first 1-2021-4041-6061-80 ... 101-109 next last
fyi
1 posted on 03/01/2007 5:10:40 AM PST by shrinkermd
[ Post Reply | Private Reply | View Replies]

To: shrinkermd

Okay, everyone in the room who didn't see this coming, raise your hands.

Anyone?

Anyone?

Bueller?


2 posted on 03/01/2007 5:21:31 AM PST by Obadiah (Yes, I do question Democrat's patriotism.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: shrinkermd

The fed better not bail any of these mortgage companies out.

They made their bed, let them sleep in it.


3 posted on 03/01/2007 5:25:42 AM PST by DB
[ Post Reply | Private Reply | To 1 | View Replies]

To: DB
The fed better not bail any of these mortgage companies out.

The Fed can't bail anybody out.

That task would fall to Congress (think S&L bailout).


BUMP

4 posted on 03/01/2007 5:40:09 AM PST by capitalist229 (Get Democrats out of our pockets and Republicans out of our bedrooms.)
[ Post Reply | Private Reply | To 3 | View Replies]

To: DB

From MortgageImplode.com
Latest count of major US mortgage lenders that have croaked since late 2006: 27


5 posted on 03/01/2007 5:42:05 AM PST by NC28203
[ Post Reply | Private Reply | To 3 | View Replies]

To: DB
The fed better not bail any of these mortgage companies out. Mortgage companies don't hold these loans, so it is no sweat off their backs. Except I think there are rules if they default within 6 months it may become the mortgage companies responsibility.
6 posted on 03/01/2007 5:42:59 AM PST by Always Right
[ Post Reply | Private Reply | To 3 | View Replies]

To: capitalist229

I wasn't referring to the Federal Reserve, I was referring to the Federal Government.


7 posted on 03/01/2007 5:45:20 AM PST by DB
[ Post Reply | Private Reply | To 4 | View Replies]

To: Always Right
Someone knowledgeable in these things posted that often the buyers of mortgage-backed securities can "unbuy" them within a certain timeframe if they appear bad.

Thus, the slimy mortgage broker who sold the bad loan gets it dropped back into his/her lap.

8 posted on 03/01/2007 5:47:30 AM PST by Sender ("Great powers should never get involved in the politics of small tribes.")
[ Post Reply | Private Reply | To 6 | View Replies]

To: shrinkermd
... Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months.
9 posted on 03/01/2007 5:48:44 AM PST by Always Right
[ Post Reply | Private Reply | To 1 | View Replies]

To: shrinkermd
... Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months.

. The problem with stats like that is it gives no historical perspective. 14 months ago, the housing market was booming. Prices were rising and default rates were extremely low. Even with a 'doubling', default rates are probably still well below historical averages, but we don't know from reading this.

10 posted on 03/01/2007 5:49:40 AM PST by Always Right
[ Post Reply | Private Reply | To 1 | View Replies]

To: shrinkermd
Alt-A loans accounted for roughly 16% of mortgage originations last year...

... Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months...


so how bad is it...really ? sky is falling ? probably not !
11 posted on 03/01/2007 5:50:37 AM PST by stylin19a
[ Post Reply | Private Reply | To 1 | View Replies]

To: shrinkermd
Alt-A loans accounted for roughly 16% of mortgage originations last year...

... Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months...


so how bad is it...really ? sky is falling ? probably not !
12 posted on 03/01/2007 5:50:42 AM PST by stylin19a
[ Post Reply | Private Reply | To 1 | View Replies]

To: teenyelliott

ping


13 posted on 03/01/2007 6:25:45 AM PST by definitelynotaliberal
[ Post Reply | Private Reply | To 1 | View Replies]

To: DB

What if one of the Fed's Member Banks needs bailing out??
I suspect we will be paying while the bank's management gorged themselves on bonuses during the good times.


14 posted on 03/01/2007 6:29:23 AM PST by hubbubhubbub
[ Post Reply | Private Reply | To 3 | View Replies]

To: Always Right
The problem with stats like that is it gives no historical perspective. 14 months ago, the housing market was booming.

How do you expect people to panic if you're going to be rational? You would never make it as a journalist.

15 posted on 03/01/2007 6:29:52 AM PST by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
[ Post Reply | Private Reply | To 10 | View Replies]

To: Always Right

Your in the business so you may know better than I, but it seems that people with incomes of 50k or 75k getting loans for 500k houses is out of whack. If I live in one of the markets where this is the norm, I think I would be looking to move away to another more reasonably priced area.


16 posted on 03/01/2007 6:32:58 AM PST by Domicile of Doom
[ Post Reply | Private Reply | To 10 | View Replies]

To: definitelynotaliberal
No surprise here.

Hubby and I were talking the other day about this. One particular real estate guy here, who was selling new houses, would take all of his clients debt (car loans, credit cards, etc.), and roll it into the price of the house.

He had a mortgage broker and a crooked appraiser who would go along with it, because as long as THEY get paid, who cares, right?

Well, many many of those loans have gone belly up over the past year.

Big surprise. People would be amazed to know how much crooked crap goes on in real estate, by the very people who are charged with protecting the buyers, sellers, and lenders.

The problem lies with the b.s. bureaucracy do-nothing ethics boards that are supposed to oversee these people.

It is nearly impossible to get them to punish wrong doers.

So, it ends up being the responsibility of buyers to protect themselves despite the fact that they have "professionals" who are supposed to walk them through the process, and many are too ignorant to do that.

17 posted on 03/01/2007 6:37:52 AM PST by teenyelliott (Soylent green should be made outta liberals...)
[ Post Reply | Private Reply | To 13 | View Replies]

To: Always Right

That is true. Another factor is people could sell their house in a few weeks if they ran into problems. Now they are sitting closer to historical average times to sell.


18 posted on 03/01/2007 6:45:30 AM PST by zek157
[ Post Reply | Private Reply | To 10 | View Replies]

To: capitalist229
That task would fall to Congress (think S&L bailout).

joe taxpayer subsidizing the elites, again!?

19 posted on 03/01/2007 6:50:56 AM PST by 1234 (HELP Chrissie Matthews get the "O-Bomb" the Democratic nomination)
[ Post Reply | Private Reply | To 4 | View Replies]

To: stylin19a
so how bad is it...really ? sky is falling ? probably not !

It's pretty bad, but hardly unprecedented.

20 posted on 03/01/2007 7:06:16 AM PST by JohnnyZ ("I respect and will protect a woman's right to choose" -- Mitt Romney, April 2002)
[ Post Reply | Private Reply | To 12 | View Replies]


Navigation: use the links below to view more comments.
first 1-2021-4041-6061-80 ... 101-109 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson