Is it only subprime loans that are of issue in the current economic crisis?
While subprime loan defaults continue to be the most serious single problem facing the loan market, delinquency rates are increasing substantially for nearly all credit classes, including ALT-A and jumbo (i.e., those with amounts greater than US$417,000) mortgages. For example, Fitch Ratings announced in December 2008 that delinquency rates for recent ALT-A originations had risen by as much as 585 basis points between May and October of 2008.[ii] One of the primary triggers for delinquency problems in the subprime market was the origination of loans that were unaffordable at inception (or that contained future payment reset provisions that should have been expected to become unaffordable). Conversely, problems in other credit classes increasingly are being caused by deteriorating employment market conditions (e.g., a borrower was able to repay the loan at inception, but is now unable to do so as a result of a lost job or reduction in salary), as well as continued declines in real estat
