Deutsche Bank Warns on Alt-A Mortgages

Deutsche Bank on Tuesday warned of significant pending write-offs tied to Alt-A mortgages, adding to recent industry speculation that the mortgage class would be the next shoe to drop this earnings season.

The company said in a brief statement Tuesday that it expects first quarter 2008 mark-downs to approximate 2.5 billion euros, or $3.9 billion, and cited market “conditions [that] have become significantly more challenging during the last few weeks.”

Alt-A isn’t the only area expected to contribute to losses — the bank also said that leveraged loans and loan commitments and commercial real estate would be affected by write-downs — but it is the first time a major i-bank has warned of looming losses in Alt-A mortgages.

“Truthfully, it’s rather ominous,” said one source, who asked not to be named. “There is plenty of Alt-A out there that hasn’t yet been marked.”

Housing Wire recently covered a Clayton report that found Alt-A deliquencies nearing 18 percent in February, despite a the near non-existence of outstanding borrower rate resets. The report also found that loss severity on Alt-A defaults was approaching the historically high levels of subprime mortgages, as well.

Disclosure: The author held no positions in DB when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.