Boston Globe (08/19/08)
The mortgage crisis could last another two years in some markets due to mounting defaults on so-called liar loans. Many borrowers have been unable to refinance due to sinking home prices, and lenders now want homeowners to fully document their income and assets. Alternative-A loans were viewed as a profitable product because they carried higher fees and higher interest rates; but many institutions that specialized in the loans--including American Home Mortgage, Bear Stearns and IndyMac Bank--are now defunct. Defaults on liar loans have already reached a record level, and Moody's Economy.com believes losses on the loans could reach $100 billion.
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