Alt-A Mortgage Problems
Subprime and Alt-A (including "stated income" or "liar's loans" which are basically loans made to home buyers without the verification of borrowers' incomes; home buyers tend to overstate their incomes in order to get the loan amounts they desire to purchase their dream homes, thus called the "liar's loans") loans account for about 21 percent of loans outstanding and 39 percent of mortgages made in 2006.
In April 2007, financial problems similar to the subprime mortgages began to appear with Alt-A loans made to homeowners who were thought to be less risky. American Home Mortgage said that it would earn less and pay out a smaller dividend to its shareholders because it was being asked to buy back and write down the value of Alt-A loans made to borrowers with decent credit; causing company stocks to tumble 15.2 percent. The delinquency rate for Alt-A mortgages has been rising in 2007.
In June 2007, Standard & Poor's warned that U.S. homeowners with good credit are increasingly falling behind on mortgage payments, an indication that lenders have been offering higher risk loans outside the subprime market; they said that rising late payments and defaults on Alt-A mortgages made in 2006 are "disconcerting" and delinquent borrowers appear to be "finding it increasingly difficult to refinance" or catch up on their payments. Late payments of at least 90 days and defaults on 2006 Alt-A mortgages have increased to 4.21 percent, up from 1.59 percent for 2005 mortgages and 0.81 percent for 2004, indicating that "subprime carnage is now spreading to near prime mortgages."
Read more about this topic: United States Housing Market Correction
Famous quotes containing the words mortgage and/or problems:
“We are playing with fire when we skip the years of three, four, and five to hurry children into being age six.... Every child has a right to his fifth year of life, his fourth year, his third year. He has a right to live each year with joy and self-fulfillment. No one should ever claim the power to make a child mortgage his today for the sake of tomorrow.”
—James L. Hymes, Jr. (20th century)
“The Settlement ... is an experimental effort to aid in the solution of the social and industrial problems which are engendered by the modern conditions of life in a great city. It insists that these problems are not confined to any one portion of the city. It is an attempt to relieve, at the same time, the overaccumulation at one end of society and the destitution at the other ...”
—Jane Addams (1860–1935)