Alt-A Loans a Wild Card in 2009 US Mortgage Outlook
Not-quite-prime Alt-A loans will continue to perform poorly throughout 2009 as economy-wide payment shocks, such as job losses, and mortgage-specific shocks, such as amortisations, continue to stretch borrowers, according to CreditSights.
The payment-flexibility common in such loans creates uncertainty about the current loan-to-values and the timing of when higher monthly payments will begin, CreditSights says in US Mortgage Outlook Part 2: The Alt-A Wild Card.
Falls in floating rates have reduced the pain associated with interest-rate adjustments to such an extent that many borrowers will pay less per month this year than last, CreditSights says. But, 2005 negative amortisation mortgages may reach their loan limits in 2009 and be forced to start repaying the full interest rate and principal.
The one certainty for Alt-A borrowers is that steeply rising unemployment will ensure that the poor performance of 2008 is repeated in 2009.
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