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With sub prime lending gone, Alt A loans have followed

Thu Jan 17, 2008 12:01AM | By Tony

See more in Mortgage | Permalink | Email | Comments (0)

and with that, the home prices will be depressed even further. Chase just announced that it is eliminating the entire suite of Alt A Products. You have to understand the implications of this decision as other lenders will follow without shred of a doubt. The Alt A mortgages were designed for the buyers and existing homeowners with some minor credit blemishes such as one or two late credit card payments, one car loan late payment and so on.

These loans often required little or no proof of income and assets, as long as your credit scores were over certain limit, which in the heydays of the housing boom got as low as 600. The most ridiculous program was offered by now defunct American Brokerage Conduit, which needed no income, no assets verification. As long as you worked somewhere and your average credit score was 620, you could get a mortgage with, if I am not mistaken, as little as 5% down.

The Alt A mortgages were given to many more homeowners than sub prime loans. By eliminating them altogether, the lending industry cuts off another large pool of future home buyers. With the huge inventory of unsold and foreclosed homes, and with new homes being built, the housing market will be suffering more and prices will go even further down.

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