Alt-A and Subprime Mortgages Defined

Alt-A is a product type mortgage, usually low documentation and lower loan-to-value, whereas subprime is a customer type mortgage typically because of low credit scores. In the first half of 2006, 16 percent of mortgage originations by dollar volume were Alt-A, vs. 62 percent for prime, 19 percent for subprime, and 3 percent for other.

Here at Mortgage Blues we don’t think subprime will be the real problem. Alt-A mortgages will be the big problem. Subprime has risks associated, like alligator wrestling and pit bull training. You expect to get bitten. The bottom line is there will less capital pumped into the economy and less disposable income to go around.