Some interesting factoids about Alternative A-Paper loans:
For lenders, Alt-A mortgages are considered riskier than "prime" loans, yet safer than "subprime"
They are defined by the following characteristics:
- Reduced borrower documentation (NINJA- No Income, No Job or Asset loans)
- High debt to income ratio
- High loan to value ratio
Most Alt-A mortgages are "non-comforming" and do not fall under Government Sponsored Enterprise (Frannie/Freddie) lending guidelines
Typically the borrowers are not credit risks, but the loan structure itself enhances the risk profile
The low amount of documentation allows for borrowers to take on more than they can afford
Alt-A loans are widely used for investment properties, raising the chances that they will go to foreclosure
Thursday, December 18, 2008
What Are Alt-A Loans?
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