Friday, March 09, 2007

Subprime Mortgage Trouble Spreading To "Alt-A" Market?

The trouble being experienced by the mortgage market that caters to borrowers with weak credit (subprime borrowers) may be spreading to, what the mortgage industry refers to as, the "Alt-A" mortgage market, according to an Associated Press article reported by the Florida Association of Realtors.

"Alt-A" refers to that portion of the mortgage market that caters "to people who fall in the gray area between “prime” (borrowers considered the best credit risks) and “subprime” (borrowers considered the greatest credit risks)", according to the article. Alt-A borrowers are considered less risky than subprime borrowers because of their higher credit scores.

Data from one industry analyst indicates that "the default rate for Alt-A mortgages has doubled in the past 14 months." This data, however, contrasts with recent Congressional testimony given by the head of the Federal Reserve Board.

To read more, see Mortgage defaults start to spread.
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