What's Going On

Before I start, please note that Fannie Mae and Freddie Mac loans and mortgage backed securities are doing just fine. They are not seeing an increase in foreclosures or other negative issues. Rates are actually coming down!

The stock market last week was responding to concern over "Alt A" mortgages. Alt A are mortgages made to good borrowers with less than full documentation (Full Doc). Full Doc loans have employment income and assets verified by the lender before closing. Alt A loans include State Income, Stated Assets, No Doc, No Ratio and variations on these. The fear is that more and more of these loans will end up in foreclosure so the value of the bond went down giving a bond buyer a higher return.

A few weeks ago the stock market reacted to the Sub Prime as the foreclosure rates climbed.

One article I read stated that the bond rating system was flawed and these mortgage bonds needed to be reexamined for quality.

Follow the link to my Realtor's Newsletter for more explaination of what is happening in the Mortgage Bond industry.

In today's New York Times, discussing SubPrime Loans, the complexity of the proble is also discussed. NY Times article

Link to my weekly Realtor news letter:
Paul's MMG Weekly Just be aware that American Home Mortgag quit originating loans last weeks. I should have a new work home by next week.

MMM