Using information provided by lenders who finance alt-A loans, Lending Arsenal’s multi-lender loan pricing search engine for mortgage professionals effectively uses information from top wholesale lenders to help you compare sales quotes with rates and rebates, all tailored to your borrower's loan scenario.

Every day, brokers are originating alt-A loans and wholesale lenders are underwriting them. There is nothing uncommon about such occurrence. The problems arise, however, when people try to define alt-A loans in exact terms. Although many disagree on the concrete definition of what an alt-A loan is, certain key features can be pointed out.

Alt-A loans can be generally described as loans that are somewhere between A-paper and subprime loans. The exact boundaries defining where alt-A loans end and the other types of loans begin are not set in stone and can lead to partial overlaps. Most often, alt-A loans are viewed as almost conventional, but lacking some characteristics that would make them be considered prime. Thus, the borrower might have a perfect credit score, as well as sufficient income, but he or she would not be eligible for prime loans. Some of the examples include:

• LTV is in excess of 80% and there’s no primary mortgage insurance
• The borrower is not a permanent resident of the United States
• The loan is for a non-owner occupied property
• DTI ratio is above the allowed limit
• Sufficient documentation disclosing borrower’s source and amount of income is not provided

In such circumstances, alt-A loans might be the best way to go as they provide flexibility of options for the borrower, while not fully losing the advantages of most A-paper loans.

Falling short of prime loan range, alt-A loans are often considered to have higher risk associated with them. This results in a slight interest rate increase, as compared to conventional loans. The rate, however, still remains more favorable than it would be for a non-conforming loan. Additionally, being stuck in limbo between A-paper and subprime loans, alt-A loans tend to benefit from relatively low credit risk, as associated with prime loans, and they also benefit from having relatively low prepayment risks, typical of subprime loans.

Overall, although a solid definition of alt-A loans is absent, a pretty strong idea of what they are exists. Moreover, alt-A loans equally share the spotlight with prime and subprime loans in the market as many wholesale lenders tend to underwrite alt-A loans and offer competitive packages to their brokers and borrowers. As such, a need for a way to quickly and precisely price alt-A loan scenarios from multiple lenders exists. Conventionally, mortgage brokers used to either guess what companies would have best deals, going with their instincts to originate loans, or they would fill out and fax applications to multiple alt-A wholesale lenders, hoping to receive competitive quotes. A third method was to use lenders’ online loan prequal services. In all of these cases, the procedure is either highly error-prone or takes a long time to complete, considering that information about a particular loan scenario has to be processed anew for each individual lender, often resulting in a smaller number of sales or loss of customers altogether. Such outcome necessitates the use of multiple lender pricing engines, such as Lending Arsenal, in order to compare loan options from multiple lenders, while only having to enter the loan scenario once.