by Calculated Risk on 3/01/2007 11:05:00 AM

From the WSJ: Mortgage Defaults Start to Spread

The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.

At issue are mortgages made to people who fall in the gray area between "prime" ... and "subprime" ... A record $400 billion of these midlevel loans -- which are known in the industry as "Alt-A" mortgages -- were originated last year, up from $85 billion in 2003 ... Alt-A loans accounted for roughly 16% of mortgage originations last year and subprime loans an additional 24%.
...
Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months. "The credit deterioration has been almost parallel to what's been happening in the subprime market," says UBS mortgage analyst David Liu.