Comments on: Housing Bubble Bursting for Alt-A’s?

By: fester

fester — Wed, 11 Apr 2007 12:10:10 +0000

James --- first thanks for the link, I appreciate it. Secondly, you are right a good deal of the Alt-A borrowers who are in trouble or may be in trouble will have an out that is personally non-devastating. However I am worried about three things. The first is the marginal borrower, they are going to be wrecked. Secondly, without the marginal borrower higher up on the credit ladder than the marginal subprime borrower that is already being destroyed, there are now far fewer marginal sellers despite facing more desperate buyers facing reality that they won't see double digit appreciation, and finally I continue to worry about the secondary impacts of a decline in housing transaction volume and dollar levels on the wider economy.

By: jeff b

jeff b — Wed, 11 Apr 2007 02:05:27 +0000

I just hope that those of us who _aren't_ speculating morons won't be left holding the bag in the form is a speculator bailout.

By: bob in fl

bob in fl — Wed, 11 Apr 2007 01:42:38 +0000

candy & yetanotherjohn - You have said what I didn't know how to say. Further, this scenario leaves out other influential factors, such as the likelihood of higher unemployment levels creating more foreclosures, creating more empty housing inventory...

Eventually the cycle will bottom out & things will get better. But to say it "likely won't be that ruinous." is whistling in the dark, especially for those who lose all they have.

By: Dale

Dale — Tue, 10 Apr 2007 23:42:39 +0000

Thanks for the education Candi.

By: candi

candi — Tue, 10 Apr 2007 23:39:58 +0000

"A" paper is a conventional, fully documented loan.

Alt-A - is a non-conventional loan. Alt-A may rely on alternative sources of documentation to qualify a borrower. For example, a lender may use 12 months of bank statements for a self-employed borrower, the lender will calculate a percentage of total deposits into the account and call it income. A conventional loan would require tax returns. Alt-A generally has a higher interest rate because the borrower profile is considered to be a higher risk (lower credit score, minimal reserves and/or higher loan-to-value)

By: Dale

Dale — Tue, 10 Apr 2007 23:15:17 +0000

What is an "Alt-A" loan? Oh and very good point yetanotherjohn!

By: World and Global Politics Blog » Blog Archive » Housing Bubble Bursting for Alt-A’s?

Tue, 10 Apr 2007 22:42:05 +0000

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By: yetanotherjohn

yetanotherjohn — Tue, 10 Apr 2007 21:33:41 +0000

And if you are in a million dollar home that is now worth only $800K, think of how much better off you would have been getting into a substantially cheaper home in the first place.

I'm sorry, but if you are buying a million dollar house you can't afford hoping for some market magic to happen, that is like drawing to an inside straight. It may work occasionally, but don't come crying to me when it goes south.