As one would expect, delinquencies on subprime mortgages are rising. Additionally, Alt-A mortgages are seeing an increase in delinquencies as well. Reuters reports on the rise in failing home mortgage loans:

Delinquencies for Alt-A mortgages rated between 2005 and 2007 are climbing, with total delinquencies rising as high as 17 percent in some cases, more than 6 percentage points higher than previous estimates, the ratings agency said in a report.

Lower-quality subprime mortgage delinquencies soared as high as 37 percent for mortgages originated in 2006, 4 percentage points higher than previous estimates, S&P said.

What are Alt-A mortgages?

Alt-A mortgages are considered to be lower risk than subprime mortgages. These are mortgages that have more relaxed lending standards than prime mortgages. Alt-A mortgages feature less strenuous income documentation, as well as some higher loan-to-value ratio allowances. These mortgages fall between subprime mortgages and prime mortgages in terms of risk categorization.

Alt-A mortgages were considered good investments — especially in mortgage backed securities — because they have higher interest rates than prime mortgages and less risk than subprime mortgages. Mortgage backed securities include Alt-A mortgages in order to offset some of the risks of subprime mortgages in the security while still prompting a desirable return. Now, though, with the increase in delinquencies, it is reasonable to assume that mortgage backed securities are likely to head even lower.

The fact that home mortgage loans are seeing delinquencies rise in this category of loan is proof that the housing market crisis is moving up the food chain. Indeed, with the economy slowing down and inflation on the rise, it might not be long before we see a signification jump in delinquencies on prime mortgages.

Indeed, loan delinquencies are on the rise in nearly every loan category.

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prime mortgages, mortgage back securities, loan delinquencies

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