http://www.nytimes.com/2009/07/05/business/05gret.html

Fist off the article doesn't call them liar loans, but unlike subprime loans which we knew were weak credits, Alt-A are loans that weren't never fully documented, which leads me to believe the appraisals might not have been proper, perhaps a drive-by viewing..

This throws cold water that it's a good thing to lend at say above 80% of LTV which is basically what people like Maxine Waters & Barney Frank push for with regards to gov't sponsored lending(see CRA lending standards).

This also adds weight to the argument that we need the best quality appraisals which (appologies to the N.A.R.) protect the lender or entity who bears the risk of loss in the event of foreclosure.

It's also surprising that with regards to loans in securitizations that the lowest rated bond holders are not consulted or allowed to vote on modifications, if it's true that the loss rates are that high.

Last note. most modified loans default later, at least that's what we're hearing. Kinda like stats about re-addiction rates among former addicts..

http://www.valpo.edu/law/faculty/awhite/data/may_09_summary.pdf

Mortgage Loan Losses Nearly 65% For Alt-A This number is staggering and blows my mind. Understanding that the banks may have been advancing interest for up to two years, and that legal fees may have been incurred, it still is mind blowing that there the residual equity was 35% and in some cases averaged 25%.

Highly suggestive here is that the risk of the loans was transferred via the magic of securitization to those who did not understand it...

Thanks for these posts, Riversider.