S&P: The Alt-A Market Is Freaking Out About Default Again, As The Reset D-Day Approaches


Remember the Alt-A time bomb?

It’s the wave of Alt-A mortgages that were sold to home buyers with a teaser rate they could barely afford.

Well, a wave of these mortgages is still set to reset to higher, even less affordable interest rates that could push even more homeowners into default.

Markets have begun to freak out about it again, as D-Day approaches:

Research Recap: Investors’ default rate forecasts for collateral in nearly all classes and vintages of U.S. residential mortgage-backed securities have risen dramatically in Standard & Poor’s Fixed Income Risk Management Services’ latest quarterly survey.

[S&P:] “Twelve-month default rate expectations on certain U.S. RMBS collateral have doubled since the previous quarterly survey, with U.S. 2007 Alt-A pay option ARM RMBS collateral default rate predictions rising to 25% from 12% polled in Q3.”

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