From the OC Register:
Alt-A loans once were limited to people with good or pretty good credit who didn’t qualify for the best mortgage rates. The original Alt-A borrowers had little money for a down payment or a minor credit issue, and so received an interest rate higher than prime but not as high as subprime.
Over time, more and more borrowers took advantage of the ability to qualify for a loan while providing less documentation.
The more housing prices rose, the more popular Alt-A loans became. Alt-A loans, experts say, make it easier to qualify for more debt. Many people took advantage of that looser standard to get a loan with a low “teaser” payment in the short run.
“The most creative mortgage products came out of the Alt-A business,” said Manuel Ramirez, an analyst with Keefe Bruyette & Woods in San Francisco.
Last year, 20 percent of home purchase loans were Alt-A, up from 5 percent in 2002, according to a March 12 report by Credit Suisse.
The report said lenders took too many risks with Alt-A loans last year. For example:
On average they loaned 88 percent of the value of a home, with 55 percent of homebuyers taking out a simultaneous second mortgage, suggesting such borrowers didn’t pay mortgage insurance and borrowed the full value of the home.
Low or no documentation loans represented 81 percent of all Alt-A purchase loans in 2006, up from 64 percent in 2004.
Loans with a one-year fixed “teaser” rate accounted for 28 percent of Alt-A purchase loans last year, “setting the stage for considerable reset risk” when the teaser period ends.
…
Ramirez said it’s “eerie” how the subprime correction appears to be repeating in Alt-A.“Compared to subprime it’s at a snail’s pace but I think it’s real,” Ramirez said.
Data on homeowners missing their monthly payments seem to fit his assessment.
Alt-A delinquencies hit 2.90 percent in February, more than double 1.23 percent a year ago, according to First American LoanPerformance, which tracks loans sold to investors as securities. Yet while that’s much greater than 0.47 percent for prime loans, it’s far from the 14.79 percent for subprime.
Analysts say delinquencies are rising in the Alt-A sector for the same reasons as subprime: too many loans made with little or no down payments combined with little or no proof of income. That’s a combination sure to backfire as soon as home prices dip, experts say.
Bad loans are mounting on the books of Alt-A lenders. Yet their reserves for loan losses aren’t keeping pace, according to a Register analysis of filings by Impac, IndyMac and Downey, as well as interviews with analysts and federal regulators.
I live in Berkeley Township in Ocean County where more and more houses sport For Sale signs seemingly forever. Many of these homes are obviously empty.
Now our property taxes are about to be reassesed based on heaven knows what comparables in that nothing this year is selling. To add further insult to injury a portion of our town located between lovely Route 9 and Barnegat Bay was declared a “protected area” and the law now states a new house must be built on 3 acres. No such land exists of course but the town council seems to have annointed a handful of unelected and rarely mentioned people who pass judgement case by case on whether the remaining postage stamp lots can wink, wink, be built on. Some how or other not a single new house has gone up on the required three acre lots but the postage stamp lot crowd is doing just what they did before.
So in effect for the fact that you may be stuck in a protected area that provides you with nothing other than what God put here, we are being set up to pay an even higher tax rate increase than those in “unprotected” areas like senior villages where taxes are frozen if income levels (not wealth) are low and services rendered are substantially more than the rest of us see.
Now the wisdom of New Jersey’s having the highest real estate taxes in the nation for the joys of living in the overcrowded and underserviced State, completely eludes me. I realize that many politicians live higher lifestyles that most of the rest of us but are they going to continue to ignore the fact that they soon will be staring at empty streets where even they won’t be able to get blood out of a rock.
We as a State have more unneccessary jobs and departments than one could believe possible. Not one single thing is being done to bring down the very expensive and way too large payroll which ultimately must be done to make this a State where people can afford to live.
When did it become a government’s business to run aquariums and marinas and all sorts of sports palaces and convention centers? If we don’t convince the folks in office soon that times must change soon we will be stuffed to the gills with illegal aliens who want services they don’t pay for, tons of government employees doing nebulous jobs, and a few very wealthy people who don’t have to worry about the price of anything. The rest of us will be forced out. Yes, we will take a beating on our houses or the smart folks with the no money down deals will just walk.
I truly see the possibility of a real depression II coming our way and so much of it is due to our re-electing the same folks over and over who take such beautiful care of themselves at our expense while many of us are having trouble paying higher and higher property taxes, higher food prices, higher heating and cooling costs, and of course higher gasoline prices.
Without a boyfriend like Jon Corzine on your side, I question how many middle class people can survive much longer – 40 year mortgages or not.
The proverbial well has run dry and yet I haven’t seen one single NJ politician sit down with a bunch of accountants and try to find a way back to a fair and reasonable way of life for ALL – not just the in crowd who get the best benefits for the least stressful work known to man.
Is anyone awake or are we all just waiting for a 9-11 replay to keep our minds unfocused forever?
Just thoughts but they are keeping me from sleeping well at night.
Helen,
Eccellent post.
I agree, well said, I’d suggest reposting this in the top thread just in case anyone missed it.
jb
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