An Alt-A mortgage, short for Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or "prime", and less risky than "subprime," the riskiest category. For these reasons, as well as in some cases their size, Alt-A loans are not eligible for purchase by Fannie Mae or Freddie Mac.[1] Alt-A interest rates, which are determined by credit risk, therefore tend to be between those of prime and subprime home loans, although there is no single accepted definition of Alt-A.[2] Typically Alt-A mortgages are characterized by borrowers with less than full documentation, average credit scores, higher loan-to-values, and more investment properties and secondary homes.[3] A-minus is related to Alt-A, with some lenders categorizing them the same, but A-minus is traditionally defined as mortgage borrowers with a FICO score of below 680 while Alt-A is traditionally defined as loans lacking full documentation.[4] Alt-A mortgages may have excellent credit but may not meet underwriting criteria for other reasons.[5] During the past decade, a significant amount of Alt-A mortgages resulted from refinancings, rather than property purchases.[6][when?]
Alt-A loans should not be confused with alternative documentation loans, which are typically considered to have the same risk as full documentation loans despite the use of different documents to verify the relevant information.[7] As with subprime mortgages, a greater portion of Alt-A mortgages tend to be originated by specialized lenders, rather than banks and thrifts.[8]