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Alt-a foreclosures in Santa Rosa

June 1, 2009 | 11:33 am

The Santa Rosa Press Democrat noted this weekend that many Alt-a mortgages, a type of variable-rate mortgage sold to people typically better off than subprime borrowers, are now heading into foreclosure in that area. The paper says 18% of Sonoma County mortgages are Alt-a's.

Such loans were a staple of failed Pasadena lender IndyMac Bank. They served people with good credit but without the income or down payment traditionally required for the amounts they borrowed. As their rates reset, many can no longer afford their monthly payments.

As Calculated Risk notes in its analysis of the trend, when these borrowers are foreclosed, it may be harder to find buyers for their mid-range houses than for the bottom-end properties that now dominate the foreclosure market. That's because there are fewer "trade-up" buyers who sell a lower-priced home then buy a more expensive one. Sellers of low-end homes today aren't people moving up, but banks clearing out repossessed inventory.

 "The foreclosure crisis will now be moving up the value chain," CR predicts.

-- Peter Y. Hong

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