RI in May to face a new crisis with Alt-A loans foreclosure

Journal Editor Since the residential mortgage market, both nationally and in Rhode Island, has begun to show signs of stability could be another storm is to block beer on the horizon, at least rock or reverse once again the market? Unable to perform Translation:invalid textLocal experts agree that no ad-traditional mortgages called Alt-A loans, which are probably directed toward the problems this fall, but nobody can say how hard Rhode Island. Unable to perform Translation:invalid text"I think going to the market and the market very quickly," said Karl A. Martone, president-elect of the Realtors Association of Rhode Island. "I felt a wave of concern." Unable to perform Translation:invalid textRichard H. Godfrey, director general of Rhode Island Housing, the State Agency, which agrees with guides and accommodation - to a certain extent. Unable to perform Translation:invalid text"I think Rhode Island is not the size of a problem, because in some markets around the country," said Gottfried. "This does not mean that a lot of Rhode Iceland is on the market. If it is a separate room, which would not be a problem." Unable to perform Translation:invalid textAlt-A, because they tend to borrowers with high income and high credit scores go, "said Godfrey, the figures are much lower than the subprime mortgages that started the practice of real estate, long the mortgage crisis. Unable to perform Translation:invalid textReal numbers are hard to obtain, but the Federal Reserve Bank of New York issued a report in May 6890 was one of the Alt-A loans in Rhode Island. This compared to 10,301 subprime loans at the same time. Meanwhile, many subprime loans have led to the fact that much of the crisis had already been deleted and removed from the statistics. Unable to perform Translation:invalid textIn March, the Mortgage Bankers Association's 138,673 mortgages in Rhode Island, according to a spokesman Godfrey. Using this comparison, the Alt-A loans, because the 5 percent of all mortgages Iceland Rhode. Unable to perform Translation:invalid textAlt-A mortgage loans, a category between subprime loans and. Their name comes from the test target of the debtor is required: Documents and an alternative credit rating. Alternative documentation usually refers to wealthier borrowers, which is not documented in terms of income, such as small business owners, so that only provide for their income. Unable to perform Translation:invalid textAs such, the Alt-A loans were generally written for properties at high prices, said John Rao, a resident of Newport, who is a lawyer for the National Consumer Law in Boston. Moreover, they tend not to the standards of mortgage giants Fannie Mae and Freddie Mac meet. Unable to perform Translation:invalid textOne of the biggest problems with Alt-A, according to Rao, is that often came with conditions that have allowed some borrowers to pay interest for each month, but nothing to reduce the most important. In many cases, borrowers were allowed to pay less interest accrued each month. When it happened, was transformed the interests of capital, thus increasing the debt of the loan and the amount of interest per month. Unable to perform Translation:invalid text"Looking at it in hindsight, it is incredible that these loans could be done," said Rao. "These things are just the worst of the worst." Unable to perform Translation:invalid textThe low monthly payments borrowers candidate in May, the most expensive homes than they could afford under a traditional mortgage in which payments of principal and interest due each month to buy. The only problem was with the outstanding amount is increasing each month, borrowers can not pay the mortgage. Unable to perform Translation:invalid text"The theory should be able to refinance," said Rao, adding that borrowers could fall into a traditional mortgage, if the increase in income or equity in their property. "It 'been a firm hope, all of his position." Unable to perform Translation:invalid textInstead, everything collapsed housing market and the number of borrowers at high risk for the mortgage interest rate variable, the Alt-A borrowers were trapped. Unable to perform Translation:invalid textAnd soon you learn the importance of "negative amortization" - do not have. Unable to perform Translation:invalid textAt some point, depending on how the debtor is located and what the interest is paid every month, beyond the exceptional value of the house. And 'the water, "until other borrowers can not afford to sell their house because they can not get enough to pay their mortgages, to be discovered. Unable to perform Translation:invalid textBut Alt-A is a stiff penalty. When negative amortization is completed, the loan turns into a traditional mortgage, with part of the capital and the market interest per month. Unable to perform Translation:invalid textMay be someone who would pay $ 800 per month, "Rao said in a hypothetical example, can suddenly face a monthly mortgage of $ 3,000. Unable to perform Translation:invalid textAt this stage, "said Rao, many borrowers have few options." The refinancing is virtually impossible. "The only choice would be to request the amendment of the loan from their lender or wait for the foreclosure. Unable to perform Translation:invalid textUnable to perform Translation:invalid result dataUnable to perform Translation:invalid textIt 'also provided little impact on prices. "If the values of which do? Think it will be refunded only in one position." Unable to perform Translation:invalid textOne measure is the value of homes in Rhode Island has dropped from over a year, but has removed some statistics Association of Realtors in possession of evidence that shows the market stabilizes. The median sales price of $ 210,000 in July 2009 was a year to 14 percent from July previously. But that is compared with the first months of the year when prices were 25 percent over the same month last year. Unable to perform Translation:invalid textIn addition, the number of sales in July increased by 9 percent from last year and shows greater activity in the market, conducted principally by the positive values of character down. Unable to perform Translation:invalid textAfter the wave of foreclosures in the other categories over the years years, real estate agents for the treatment of real estate transactions with non-performing format, "said Martone. Unable to perform Translation:invalid text"We are not ready this time," he said. "We are locked and loaded to manage inventory." Unable to perform Translation:invalid textHowever, Godfrey said, is blocking of losing someone in their family, and any decrease in property values has broad implications for the community. Unable to perform Translation:invalid text"Since our homes have decreased in value, we lost our money," he said.