Alt-A Mortgages..next risk for the economy (loans, credit card, debt)
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Alt-A is the real game. Sub Prime was just the national anthem in this 9 ending game of baseball we are in.
Funny, I was thinking that, too!
1st Inning: Alt-A
2nd Inning: Prime
3rd Inning: Seconds and HELOCs
4th Inning: Auto loans
5th Inning: School loans
6th Inning: Personal loans
7th Inning: Credit cards
8th Inning: Bank-to-bank
9th Inning: Fed-to-bank
OT: Joe and Jane Consumer
Oh - and add commercial in there somewhere! Ain't we got fun!
From what I have read commercial lags residential by 12-18 months but I don't know if commercial lending got as funky or creative as residential so we'll just have to wait and see.
I owned (past tense) 12 homes in the Puget Sound region until spring 2007, I bought them in 2005/2006. I was getting enough in rent to cover my mortgages and have a little left over only because I was using option arm loans and paying less than interest only. Say the full payment was $1400, and interest only was $1100, then you had the option of paying $700, guess which one I did, $700. I was only getting $900-$1200 on the houses in monthly rent.
My goal, riding the wave up in equity prices. I dumped all the houses in 2006/2007 and made a few hundred thousand before the bubble burst....talk about a nervous puppy, I knew the bubble was bursting, but I was able to sell 12 houses in a 6 month time period. Guess which kind of loan most of the mom and pop "investors" that bought my homes used?? You guessed it, Option Arms......there is NO WAY that they are cash flowing without that deal, but their payments will adjust upwards, while the home values have already plummeted since they bought. It's going to be ugly for the 2006/2007 buyers.
Take care out there......btw, I now live in TN where I own 34 acres of land, a home, pool, barns with views and I paid cash with my Seattle area money, but I'm now property rich and cash poor. So I'm living a modest lifestyle, but I'm debt free, so that's fine with me. Plus there is NO TRAFFIC here!!! Worth the money if you ask me!! I hate traffic!!!
Sorry, I rambled.....the moral to the story that I was trying to allude to is that many, many buyers bought NEGATIVE cash flow properties with the idea that the prices would only go up.....now what????
Tony
p.s. To sellers, I have 2 words......Short Sale!!! Do it now while you still can, it ain't pretty out there in property land...ask Fannie and Freddie.
From what I have read commercial lags residential by 12-18 months but I don't know if commercial lending got as funky or creative as residential so we'll just have to wait and see.
I have not researched this myself but I did read a few articles claiming Commercial RE is just as bad as RRE
Location: Georgia, on the Florida line, right above Tallahassee
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I bet 1/2+ of a trillion could buy a lot of cheeseburgers.
Wow.
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(From the article...)
About 3 million U.S. borrowers have Alt-A mortgages totaling $1 trillion...
Almost all stated-income loans exaggerated the borrower's actual income by 5 percent or more, and more than half increased the amount by more than 50 percent, according to a study cited by Mortgage Asset Research Institute in its 2006 report to the Washington-based Mortgage Bankers Association.
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