From Bloomberg

Homeowners lured by low introductory rates to Alt-A mortgages, which typically require little or no proof of a borrower's income, may fuel the next wave of foreclosures and further delay a recovery from the worst housing decline since the 1930s. Almost 16 percent of securitized Alt-A loans issued since January 2006 are at least 60 days late, data compiled by Bloomberg show. Defaults will accelerate next year and continue through 2011 as these loans hit their three- and five-year reset periods, according to RealtyTrac Inc., an Irvine, California-based foreclosure data provider.

``Alt-A will be another headache,'' said T.J. Lim, the London-based global co-head of markets at Unicredit Group. ``I would be very worried about anything issued in the last half of 2006 and the first half of 2007.''

About 3 million U.S. borrowers have Alt-A mortgages totaling $1 trillion, compared with $855 billion of subprime loans outstanding, according to Inside Mortgage Finance, a trade publication in Bethesda, Maryland. Of the Alt-A borrowers, 70 percent may have exaggerated their income, said David Olson, president of mortgage research firm Wholesale Access in Columbia, Maryland.

Fannie, Freddie Exposure

Risks extend beyond banks and consumers to Washington-based Fannie Mae, which owned or guaranteed $340 billion of Alt-A mortgages in the second quarter, equal to about 11 percent of its total single-family mortgage credit book of business. The loans accounted for half of the company's second-quarter credit losses, according to a regulatory filing. Alt-A holdings at McLean, Virginia-based Freddie Mac were $190 billion, or 10 percent of its mortgages, in the second quarter, according to the company's Web site. ...

The ``serious delinquency'' rate for Alt-A mortgages issued in 2007 hit 10 percent in half the time it took for those from 2006 to reach the same level, Moody's Investors Service said in a report last month.

``Alt-A loans have turned toxic,'' Cecala said. The combination of exaggerated income, falling home prices and payments that reset higher is ``a recipe for disaster,'' he said. ...

About one-third of Alt-A loans are payment-option adjustable- rate mortgages ...

The loans accounted for 8.9 percent of the almost $3 trillion in U.S. home loans made in 2006, according to an estimate by Inside Mortgage Finance.

This credit crunch is not over by a long shot.