Thursday, March 6, 2008

Introducing alt-A

Move over subprime it is time to make room for alt-A. You can be excused if you don't know what an alt-A loan is. But, all they seem to be are subprime loans to borrowers with more respectable credit scores. (See my earlier post on credit scoring titled The Mortgage Mess) Like their subprime siblings, the loans lack income or asset verification and with an advance rate of 100% of value. In other words they ARE subprime loans with a prettier face. Lipstick on a pig would be a good description. It turns out this was not an inconsequential part of mortgage lending in recent years. The Mortgage News trade publication reports that a total of $1 trillion (that right, trillion) of such loans were made in the past two years. For more on the subject click here to read the CBS Marketwatch article.

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