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Posted: 11/19/2008 1:41:18 PM EDT
Coming Alt-A Mortgage Crisis?

This guy is using the Federal Government's raw numbers and is saying that an Alt-A mortgage crisis is going to be much larger than the Subprime Crisis.

Factor in the current credit crisis, the almost imminent bankruptcy of Ford and GM, Obama's plan to increase taxes and let the Bush tax cuts expire, rising unemployment, plummeting consumer confidence and then tack on the possibility of this Alt-A Crisis and I can only think of one word:

Depression.

Obama's policies of raising taxes on small businesses and eliminating tax shelters on all businesses, raising taxes on investors and letting everyone's taxes increase when the Bush tax cuts expire and we'd be looking at bad things. But when you view these things through the prism of the bad lending and bad business decisions that businesses have been making and the impact it is having on the credit markets and I think it's going to get bad.
Link Posted: 11/19/2008 1:42:11 PM EDT
Does this scare anyone else?


No. Next question.

Link Posted: 11/19/2008 1:43:06 PM EDT
Scare me? No. No matter what happens, I won't starve.
Link Posted: 11/19/2008 1:53:30 PM EDT
Can someone explain in general what an “Alt-A” loan is?
Link Posted: 11/19/2008 1:54:33 PM EDT
Originally Posted By Thuban:
Can someone explain in general what an “Alt-A” loan is?


Link Posted: 11/19/2008 1:55:03 PM EDT
An Alt-A loan is nor really a loan type. Alt-A is a a way lenders have of grading or categorizing a loan. For many lenders, Alt-A would be synonymous with A-minus. The definition of an Alt-A loan is somewhat fuzzy, however. A-minus has traditionally been used to designate borrowers whose credit scores are somewhat below those of A grade borrowers, typically under 680 (credit scores range between 300 and 850).
Link Posted: 11/19/2008 1:56:01 PM EDT
Originally Posted By TerribleTom:
Originally Posted By Thuban:
Can someone explain in general what an “Alt-A” loan is?




its a lot like Alt-F4 just a bit more paperwork...
Link Posted: 11/19/2008 2:01:13 PM EDT
It doesn't matter if your credit score was 850 or 500 when you did your loan. Wall Street investors are lumping the risk all together now. Take it from me, someone who knows. They are even scared of the "easy" A paper loans they have on the books these days.
Link Posted: 11/19/2008 2:01:42 PM EDT
Originally Posted By Thuban:
Can someone explain in general what an “Alt-A” loan is?


People who don't have great credit, but not exactly bad credit being given loans with a higher loan to value ratio than the GSEs will normally allow, and often without having to document their income. They pay a higher interest rate than a traditional loan but get better deals than subprime borrowers do.


Alt A Mortgages

An Alt-A loan is nor really a loan type. Alt-A is a a way lenders have of grading or categorizing a loan. For many lenders, Alt-A would be synonymous with A-minus. The definition of an Alt-A loan is somewhat fuzzy, however. A-minus has traditionally been used to designate borrowers whose credit scores are somewhat below those of A grade borrowers, typically under 680 (credit scores range between 300 and 850). The traditional definition of Alt-A has been loans that have less than full documentation, also referred to as low doc/no doc loans.

The two definitions have morphed together somewhat. Alt-A has also come to mean loans with other "transgressions" such as not meeting standard underwriting guidelines for property type, debt ratio or loan-to-value ratio, as well as documentation requirements.

What does all of the mean to the borrower? It is important for the borrower to understand that they and the loan they are applying for has a grade. The best place to be is A. A means the the borrower's credit score is very good and the deal is straight forward without anything out of the ordinary. A loans get the most advantageous interest rates and terms.

The next best place for a borrower to be is in the Alt-A/A-minus category. This means that the borrower's credit score is not quite where it should be, or they are not fully documenting their application, or there is something a little out of the ordinary with the deal. Borrowers in this category will pay slightly higher interest rates and have somewhat more stringent qualification criteria. While these borrowers will get somewhat less than the "best deal", they will fare far better than individuals in the sub-prime categories (typically credit scores of less than 580).

Please note that every lenders criteria for Alt-A/A-Minus may be vary. Credit score requirements will be the most common area of variance. It tends to boil down to the risk tolerance of the lender.


The key worry here is that since loan to value is the biggest factor on defaults, people who are seeing their housing values plummet may be more likely to default. And since Alt-A loans are bigger than the subprime loans and since there are more of them than the subprime loans the prospects for a bigger problem in the credit markets is pretty real.
Link Posted: 11/19/2008 2:03:23 PM EDT
Originally Posted By motown_steve:
Coming Alt-A Mortgage Crisis?

This guy is using the Federal Government's raw numbers and is saying that an Alt-A mortgage crisis is going to be much larger than the Subprime Crisis.

Factor in the current credit crisis, the almost imminent bankruptcy of Ford and GM, Obama's plan to increase taxes and let the Bush tax cuts expire, rising unemployment, plummeting consumer confidence and then tack on the possibility of this Alt-A Crisis and I can only think of one word:

Depression.

Obama's policies of raising taxes on small businesses and eliminating tax shelters on all businesses, raising taxes on investors and letting everyone's taxes increase when the Bush tax cuts expire and we'd be looking at bad things. But when you view these things through the prism of the bad lending and bad business decisions that businesses have been making and the impact it is having on the credit markets and I think it's going to get bad.


This is what I was saying all election long!! If anyone bothered to listen to what the asshat said, he basically said he was going to destroy the American economy.
Then it dawned on me, he WANTS another depression. Marxist doctrine requires chaos and desperation for socialism to be accepted. Look at what FDR was able to do because of the first depression, HE WANTS AN ECONOMIC DISASTER. He prays for one.
He has the perfect storm.
He can enact his policies with his majority in Congress, and no matter how bad things get, ITS ALL BUSH'S FAULT. Obama can step forward and be the saviour, all we need do is trust him and forget about that pesky old document nobody believes in anymore.
I hope to hell that I am wrong and he is just the dumb ass he pretends to be, but he just might be a hell of a lot shrewder than any of us give him credit for.
Link Posted: 11/19/2008 2:10:50 PM EDT
Y'all didn't really believe this was a sub-prime crisis did you?

This is a liquidity bubble collapse, the sub-prime mess was just the first big crack in the dam.
Link Posted: 11/19/2008 2:14:40 PM EDT
I've been hearing that the current mortgage bubble that burst is just a bubble-in-a-bubble and that the big one hasn't burst....yet.


Even CNBC is using the term "deflationary cycle", which is eco-speak for depression.



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