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Subprime Loan Defaults Were Just the Beginning

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Despite those Friday headlines about California seeing a possible bottom in the real estate market, there's a particularly grim story in today's New York Times on how people with good credit are now falling behind on their mortgage payments. This time around, the concern is about Alt-A loans, (new word ALERT) classified as loans that were made to people with good credit but without any verification of their assets, income, or basic ability to continue to pay their mortgage. Also of concern: Prime loans. “Subprime was the tip of the iceberg,” Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities, tells the Times. “Prime will be far bigger in its impact.” According to the paper, it's difficult to know when the defaults on prime mortgages will peak, but it could be in a year or two, (typically, delinquencies on mortgages crest 3-5 years after being made: hence, experts are now seeing the subprime mortgage situation calm down). On the positive side, last week Freddie Mac and Fannie Mae stated they would up the amount of money they spend on ultimately helping people refinance mortgages.
· Housing Lenders Fear Bigger Wave of Loan Defaults [New York Times]