New Wave Of Home Foreclosures?

Last week Bloomberg.com posted an article called “Alt-A Mortgages Next Risk for Housing Market as Defaults Surge.”

Alt-A mortgages were provided to individuals who had good credit ratings but couldn’t or didn’t want to provide income verification.  There are about 3 million borrowers with these type of mortgages, totaling $1 trillion worth of debt.

In same cases these were 3-year interest only loans starting at 6.25%.  Most people who took out these loans believed the housing market would continue rising and they would be able to sell before the rates reset at much higher rates (e.g., 10.6% and higher).

Of the 3 million borrowers with Alt-A mortgages, it is estimated that 70% of them overstated their income and could be in danger of defaulting.

Ugh.  Just go read the article so you see who the guilty banks are.  And make sure your bank balances are within the limits to be fully covered by FDIC.  If I had my primary checking account with Wachovia, I’d consider finding a new bank soon.  We do have an IRA with Wachovia but we can survive if we had to wait until the FDIC came through.

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