scariest data ever: 33% of Seattle mortgages are IO/neg-am

[deejayoh]

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[femto]

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[deejayoh]

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Believe it or not, but Jim Cramer is advising people to "walk away" from their homes if they find themselves significantly under water, even if they are not struggling financially.

This just goes to my point that the massive proliferation of interest only and negative amortization loans among prime borrowers leaves the real-estate market MUCH more fragile. If you don't have any skin in the game (i.e. equity) there is little reason to stick around in a home that is worth far less than the mortgage. A trashed credit rating is a small price to pay for unloading a dead asset.

[mike2]

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[TJ_98370]

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Moody's Investors Service described some so-called Alt A mortgages as no better than subprime home loans, saying it will change how it rates related securities after failing to predict how far delinquencies would rise.

The ratings firm said today its expectations for losses on Alt A mortgages will rise between 10 percent and 100 percent, depending on whether a loan pool has a lot of debt extended to borrowers with low credit scores and little money for down payments. It's also raising loss expectations when borrowers don't fully document their incomes.

``Actual performance of weaker Alt-A loans has in many cases been comparable to stronger subprime performance, signaling that underwriting standards were likely closer to subprime guidelines,'' Marjan Riggi, Moody's senior credit officer, said in a statement. ``Absent strong compensating factors, we will model these loans as subprime loans.''

Moody's said in a separate statement that its expectations for losses on ``option'' adjustable-rate mortgages, part of the Alt A market, would rise even farther. Initial minimum payments on the loans fail to cover the interest borrowers owe, creating growing balances and possible payment spikes. ...
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