Alt-A Delinquencies For 2006 Loans More Than 4 Times Higher Than 2004 Loans
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The Alt-A mortgage loans that were written in 2006 are showing a high level of bad loans according to a report today in Inman News. The default rate on these loans is nearly 4 and a half times higher than similar loans made in 2004.
People wonder what happened to the lending environment last year that has caused such a severe backlash in the financial markets, this report may be the watershed document. Loan officers eager to keep up the volume of paper written seemed to have thrown all reason out when writing new loans.
And now we will be paying the price for the next couple of years as this sorts itself out.
After 14 months of seasoning, 4.21 percent of Alt-A loans securitized and sold on Wall Street in 2006 are 90 days or more delinquent, or have been foreclosed. That compares with 1.59 percent for 2005 vintage Alt-A loans, and .91 percent for the 2004 vintage with the same amount of seasoning, Standard & Poor’s said, citing data from First American CoreLogic’s LoanPerformance.
Standard & Poor’s attributed the higher rate of serious delinquencies in the 2006 vintage to a greater proportion of loans made to borrowers with limited income documentation and little equity in their homes. via Inman Real Estate News
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Comment by tcurranmortgage on 17 July 2007:
Maybe there were, in fact, loan officers who threw out all reason.
I prefer to think—based on my experience in the actual marketplace—the consumers were responsible in a very large part for the origination of so many “bad” loans.
I lost a lot of customers, especially the Hispanic ones, to unscrupulous, lying mortgage professionals.
While I would offer the correct loan for the applicant—usually a fixed rate loan, and one for which the applicant was actually qualified—all the consumer in front of me could hear was the interest rate.
The rate I was quoting was higher than the Neg-Am, 2/28, I/O, 3 yr prepay loan being offered by the newbie loan officer down the street (you know, the guy who six months before was flipping burgers in a fast food joint).
I just refinanced a client referred to me by her accountant.
She has been a homeowner for 8 years. A little over two years ago she refinanced with some cash out to take advantage of the low rates. She wanted a 30yr fixed rate loan.
The loan officer swore that’s what he gave her. She didn’t use an attorney at the closing to represent her or read the documents for her.
In fact, the loan was a 2/28 ARM I/O set to adjust now, July 2007.
When I first spoke to her she said, “I want a fixed rate loan and I just want to work with someone I can trust.”
(On my recommendation, she used an attorney at closing)
The rate she refinanced at two years ago? 6.00%.
Even though she was an experienced homeowner, I’d bet dollars to donuts she only heard the interest rate and paid no attention to the terms.
The problem is: how do you get the consumers to wake up and realize “lowest rate” is not the most important consideration?