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Alt-A Catching Up with B&C Problems.
Byline: Brian Collins
Washington-One year after the subprime meltdown roiled the financial markets in August 2007, subprime defaults are still rising and alt-A defaults are rising at an even faster rate.
Problems with Alt-A loans are one reason the government-sponsored enterprises, Fannie Mae and Freddie Mac, are struggling. Both are burdened with large alt-A portfolios that are deteriorating rapidly and driving their credit losses.
Freddie has a $190 billion alt-A portfolio with a serious delinquency rate that has tripled over the past 12 months to 3.72% as of June 30. It was 1.13% a year ago.
The 90-day-or-more past due rate on Fannie's $307 billion alt-A portfolio also has tripled to 3.79% as of June 30.
Alt-A loans comprise only 10% to 11% of the GSE credit guarantee business, but it makes up 50% of their credit losses.
These reduced-documentation loans generally are targeted at self-employed persons with high credit scores. Fannie's portfolio has a weighted average credit score of 719. Freddie's has a weighted average credit score of 724.
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