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Questionable business practices may have played a role, too. Some of the 2007 loans "were knowingly originated as really bad loans," says Chris Mayer, a professor of real estate at Columbia University's business school. Mortgage originators who profited handsomely from the housing boom "realized the game was completely over" and pushed mortgages out the door, says Mr. Mayer.
Last month, J.P. Morgan Chase & Co. said it expects losses on prime mortgages that weren't securitized and remain on its books to triple from current levels. The increase in bad loans is driven mostly by jumbo mortgages originated in the second half of 2007, a company spokesman said.
A Second, Far Larger Wave of U.S. Mortgage Defaults is Building
The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is building with alarming speed.
The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A, or alt-A, mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.
While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said.
"The wave on the prime side has lagged the wave on subprime side," said Rod Dubitsky, head of asset-backed research at Credit Suisse. Resetting the option adjustable rate mortgage loans "is a big event that will drive the timing of delinquencies."
Originally posted by Gools
Yikes!
Like I've been saying, 2009 is the year of pain.
.