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 ...
Okay, everyone in the room who didn't see this coming, raise your hands.
Anyone?
Anyone?
Bueller?
The fed better not bail any of these mortgage companies out.
They made their bed, let them sleep in it.
The Fed can't bail anybody out.
That task would fall to Congress (think S&L bailout).
BUMP
From MortgageImplode.com
Latest count of major US mortgage lenders that have croaked since late 2006: 27
I wasn't referring to the Federal Reserve, I was referring to the Federal Government.
Thus, the slimy mortgage broker who sold the bad loan gets it dropped back into his/her lap.
. 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.
ping
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.
How do you expect people to panic if you're going to be rational? You would never make it as a journalist.
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.
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.
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.
joe taxpayer subsidizing the elites, again!?
It's pretty bad, but hardly unprecedented.
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