The AP is reporting that Alt-A lenders are starting to have trouble selling their loans to the secondary market. If Alt-A loans are having a hard time being written, what will happen to the spring and summer selling seasons?

Obviously there is a weakness in the secondary market and as we saw with SouthStar, the Wall Street wholesalers are making more waves. Now the real question is has the market for securitized home loans for less than perfect paper dried up, or is this a maneuver by Wall Street to consolidate the lending industry while the economy is strong so they can enter it directly?

Now the so-called Alternative-A mortgage sector, which loans to borrowers with better credit than subprime borrowers but not quite prime, is starting to hurt.
One Alt-A lender, American Home Mortgage Investment Corp. of Melville, N.Y., announced late last week that it was having trouble selling its mortgages into the secondary market and would have to cut its earnings forecast for the quarter and the year. At least five analysts downgraded the stock on Monday, and its shares fell more than 15 percent on the New York Stock Exchange. The shares fell an additional 6 percent Tuesday to $20.60.
Other Alt-A lenders that have taken hits in the market in recent days are First Horizon National Corp. of Memphis, Tenn., which some analysts predict may be forced to sell out to a bigger bank, and M&T Bank Corp. in Buffalo, N.Y.
Guy Cecala, publisher of Inside Mortgage Finance Publications in Bethesda, Md., said a “backlash” from the subprime market meltdown is part of the equation.
“While you’re starting to see some deterioration of the quality, it’s not so much that investors should be dumping (mortgage-backed securities),” he said. “But nobody wants to own a security that goes down in value, whether because of public perception or the reality of the market.” via MSN Money.

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