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Mortgage pain rises beyond subprime

By ASSOCIATED PRESS
Published April 11, 2007

NEW YORK - Turmoil in the mortgage market is ensnaring more companies who lend to people with decent credit.

The spread of home lending woes beyond loans to those with weak credit threatens to reduce the availability of loans for some consumers and even threaten the existence of some lenders.

Rising delinquencies and defaults among subprime borrowers - those with blemished credit histories - have resulted in more than two dozen lenders going out of business, moving into bankruptcy protection or putting themselves up for sale.

Now the so-called Alternative-A mortgage sector, which loans to borrowers with better credit than subprime borrowers but not quite prime, is starting to hurt.

One Alt-A lender, American Home Mortgage Investment Corp. of Melville, N.Y., announced late last week that it was having trouble selling its mortgages into the secondary market and would have to cut its earnings forecast for the quarter and the year.

Guy Cecala, publisher of Inside Mortgage Finance Publications in Bethesda, Md., said a "backlash" from the subprime market meltdown is part of the equation.

Doug Duncan, chief economist for the Mortgage Bankers Association in Washington, D.C., said that Alt-A mortgages made up a small share of the U.S. market at about 6 percent of outstanding loans. Loans to prime customers, the most creditworthy, make up 74 percent; subprime loans are about 11 percent, government-backed loans 9 percent.

[Last modified April 11, 2007, 01:52:23]