Monday, January 18, 2010

Alt-A is the New Subprime

As I've been saying for some time that we have to be aware of the ticking time bomb that is the Alt-A mortgage pool. Alt-A describes those loans that were deemed to be better than subprime, but not as good as prime for a variety of reasons (low credit scores, undocumented income).

Well, Moody's is trying to get out in front of the coming wave of defaults in Alt-A....

"Moody's Investors Service put $572.7 billion in Alternative-A residential mortgage-backed securities issued from 2005 through 2007 on watch for possible downgrade after it revised its loss provisions.

The rating agency said Alt-A loans that are 60 or more days delinquent "have increased markedly" since it last revised its loss projections.

Moody's said it now projects, on average, cumulative losses of 14% of the original balance for 2005 securitizations, 29% for 2006 securitizations and 35% for 2007 securitizations."

This should indicate another wave of huge losses for financial firms holding these assets, but given that our government has decided that we should look the other way -- changing mark-to-market to mark-to-make believe -- these losses may not materialize on the books of the banks.

There haven't been any local sightings of ATM card capture tools to my knowledge. However, someone pointed out this example of the most advanced ATM fraud I've ever seen.

Normally, these card capture devices are pretty bulky and look out of place on the ATM but this example might fool me if I wasn't paying attention. All of the data capture is located in the flat section of the capture device. Some apparently even have wireless data transfer capabilities. Be careful when using unfamiliar ATM's, particularly when traveling.

Ah, the trouble with long building cycles....

"Though it may seem counterintuitive at a time when many hotels around the country are having trouble filling their rooms, nearly 100 hotels are scheduled to open in major American cities this year.

New York will have the most new hotels, 46, according to Smith Travel Research, a hotel research company in Hendersonville, Tenn., followed by Houston, with 30. New hotels are opening as well in Atlanta, Boston, Chicago, Dallas, Los Angeles, Miami and Washington. That does not include new hotels opening in the suburbs of these cities.

With hotel capacity in New York expected to rise more than 12 percent this year, Mr. Hanson predicted that consumers would be the immediate beneficiaries. “In general, new hotels will use discounting to try to gain initial market share,” he said. “This will last a long time, because there is no imminent occupancy recovery. And existing hotels will face increased price competition from new hotels, which will require additional discounting.”


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