The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.
Let's think about those figures for a minute. Alt-A loan arrears increased 4 times in a year. That's a huge pop. It indicates there are serious problems in that market from a variety of perspectives. For example, loose underwriting standards are combining with a weak job market, lagging wages and a lot of homes underwater to hit this are of the market hard.
But we're also seeing an increase in prime defaults -- which doubled over the year. There are people who have goo jobs and (probably) solid incomes. And they're having a problem getting their loans paid-off in increasing numbers.
This isn't over by a long-shot.
3 comments:
Bonddad,
Might be time to dust off the charts from the CreditSuise report showing Alt-A resets coming up?
Yeah, would like to see that chart again too. Someone on CNBC this morning said the worst of the resets "were behind us"... and I thought the peak of the AltA resets was still coming up??? With the peak of the curve early next year???
I wanted to ask you about Alt A loans at your panel at NN, but didn't bother, since the other questions were great and mine was a little off topic.
Grandma Jo
Bustamove you were reading my mind when I read this post. I keep a copy of the chart just as a reminder. Keep an eye out at the end of this year and the beginning of 09 and we'll see what happens. That's when they're scheduled to reset.
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