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20 May
Author: Charles Feldman • URL: http://www.thefeldmanblog.com
as Housing Bubble, Real Estate News
Last week, James Connery commented on my weekly post that he thought the next great crisis, following the current one caused in large measure by subprime mortgages, will come to us via something called Alt-A loans. And, he just may be right!
Alternative to grade-A prime loans..or Alt-A loans..unlike subprime loans, were dished out to folks considered credit worthy.
But, and here’s where the plot thickens, many of these loans, says the New York Times, were given “without verification of income or assets and on tricky terms…”
Watch out for 2009
Watch out because these loans will reset next year.
And, says the Times, “In coming years, if price declines are in line with expectations, Alt-A losses are projected to total about $150 billion.
So, will this crisis soon to be upon us be better or worse than the current crisis caused by subprime mortgages? No one really knows for sure. But brace yourselves for a political and economic rollercoaster ride.

9 Responses
Comments
Keahi Pelayo
May 20th, 2008 at 12:29 pm
1Sounds like a great time to buy.
Aloha,
Keahi
Sidney Manzo
May 20th, 2008 at 2:02 pm
2I hope the picture for 09 is not as bad as some economists are saying Countrywide froze all its equity line of credit. Letters were sent out last month and its going to create another problem for people who were counting on them as a safety cushion.
Sidney Manzo
James Connery
May 21st, 2008 at 8:56 am
3I am trying to locate a very good pie chart a Wall Street associate has sent me a few weeks ago.
We are in a flat period temporarily by comparison of what’s to come reset wise! AND as Charles mentioned the ALT-A crisis is going to be absolutely INSANE! 2009 will be worse than 09 and the hugest pain will be felt in 2010!
The Fed and Bank Chairman and our skeet shootin emporer have actually managed to manipulate the banks and investors into being more cooperative in regard to loan workouts. FHA has stepped in with a TINY teaser crutch and congress continues to micro manage wall street and the American Citizens. This is all creating an illusion, a FALSE consumer CONFIDENCE if you will.
I keep hearing people saying “our market has almost corrected” “the worse is over” “home sales are up”… BS! Can you say BAND-AIDE and ILLUSION?
Folks, default are continuing to raise the previous record each month and there is certainly no slow down of REO inventory. The banks are thinking just maybe there will be a bail out and that’s just NOT going to happen, unless Hugo Chavez moves in or China calls all of our loans due (not really funny) and forecloses on us, taking over total control.
Face it, when banks end up with a property at the trustee sale, they RECORD that as a sale and often time at below market. Then the properties in many cases sit on the market and go down in price each month. Finally they will be purchased again below market and gain recorded. Short sales are happening more regularly and this trend will really increase as the situation worsens. The banks already looses an average of 35-50% on the average foreclosure all said and done.
So, have the markets corrected? Have we hit the bottom? Is the worse over? These questions are answered with rage by Mr. Mortgage of Implode o Meter weekly. Although not a economics major or Wall Street expert or fed Chairman or a polished house speaker, the guy is on the money most of the time. Anyone want a link?
Also stay tuned to DS.News.com for daily review. I was turned on to that site by a Wall Street associate and it’s a real nice daily summary of what’s going on.
James Connery
May 21st, 2008 at 8:57 am
4Oh Charles, thanks for the honorable mention and I am enjoying your Blogging.
James Connery
May 21st, 2008 at 9:06 am
5Mr. Mortgage ALT-A u-tube video:
http://www.youtube.com/watch?v=pmeBSWI9sF8
Also Google- Implode 0 Meter
James Connery
May 21st, 2008 at 9:24 am
6In the last quarter of 06, the money gurus predicted a total sub prime related losses of about 100 billion. Guess what folks? Last quarter of 07 they predicted about 450 Billion in sub prime related losses. Guess what?
And, says the Times, “In coming years, if price declines are in line with expectations, Alt-A losses are projected to total about $150 billion.
Guess what? ALT-A is a much bigger animal than sub prime! So, look ahead to 09-10….. Sadly the total losses combined will far surpass and of these experts wildest predictions. Its MY prediction that we already have 150 billion in ALT-A related losses not yes exposed and we will triple that by the end of 09.
James Connery
May 21st, 2008 at 9:26 am
7Sorry about my spelling and sentence structure above, half awake here, long night!
Nadine
May 22nd, 2008 at 11:55 pm
8Hard to speculate…Everything is just too uncertain and unpredictable.
Tom Lindmark
May 26th, 2008 at 7:20 pm
9I share your concern about Alt-A defaults and would also add Option ARMs to the mix. Neither have experienced significant resets. Here is a link that will show you graphically the calendar for the resets as well as the geographic concentration of these loan products-http://blog.metro-real-estate.com/?p=304
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