Mortgage Tightening, Round 2

Submitted by Rich Toscano on August 7, 2007 - 9:08am

I've authored repeated rants to the effect that burgeoning troubles in the mortgage market were caused by high risk loans, regardless of whether those loans were "subprime." This distinction recently became clear to the mortgage lending company called American Home Lenders, or AHL for short. AHL wrote very few subprime mortgages, but rather dealt primarily in "Alt-A" mortgages -- loans that are risky by virtue of their features, but made to borrowers with good credit. The company announced on Friday that it would file for bankruptcy.

We also learned last week that a couple of big lenders have moved to cut back on funding Alt-A loans, and that rates are rising for the loans that do get funded. Bloomberg has a good summary for those who want more details.

Mortgage companies abruptly going belly up... other lenders severely tightening the purse strings... doesn't all this sound familiar?


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