For Sale By Owner Homes / Mortgage Blog

Mortgage woes are moving up a step
Associated Press
NEW YORK - The deterioration of the market for mortgage debt at the bottom of the credit ladder may be climbing up to the next rung.

M&T Bank Corp., a Buffalo, N.Y.-based regional bank, said in a Friday regulatory filing that it is having trouble selling some of its loans.

It's not unusual to hear a subprime mortgage lender -- or a mortgage bank that caters to borrowers with bad credit -- complain that investors don't want to buy its loans. What's unusual is that M&T Bank is not a subprime mortgage lender.

Shares of M&T fell 8.5 percent Monday, the first day of trading since its filing. Shares of its competitors fell sharply as well.

M&T Bank said prices dropped more than anticipated in its recent auction of some of its Alt-A loans, which carry better credit than subprime loans but don't require borrowers to provide as much documentation as prime loans. That puts the credit quality of Alt-A loans somewhere above subprime and shy of prime.

The results of the auction don't bode well for investors who believed the credit problems plaguing subprime mortgages would stay contained in subprime mortgages.

The bank cited fewer investors than expected in the bidding, and said the subprime mortgage market, which this year has been wracked by a spike in payment defaults and falling home prices, appears to be hurting the rest of the mortgage market, the bank said.