Now here come the Alt-A defaults

[david_mcmanus]

http://seattletimes.nwsource.com/html/n ... age04.html

[TJ_98370]

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The article focused on Alt-A and prime borrowers who are having trouble keeping up with their payments. Have estimated Alt-A and prime default rates included those borrowers who can afford their payments but will still default because of unwillingness to continue payments on an asset with declining value? Alt-A and prime default rates could be alot larger than anticipated IMHO.

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.

Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

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......

......Defaults are likely to accelerate because many homeowners' monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks tighten their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are "alt-A" loans, many of which were made to people with good credit scores without proof of income or assets.

"Subprime was the tip of the iceberg," said Thomas Atteberry, president of First Pacific Advisors, a Los Angeles investment firm that trades mortgage securities. "Prime will be far bigger in its impact."

In a conference call with analysts last month, James Dimon, the chairman and chief executive of JPMorgan Chase, said he expected losses on prime loans at his bank to triple in the coming months and described the outlook for them as "terrible.".....
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