(1.) A mortgage risk categorization that falls between prime and sub-prime, leaning slightly closer to prime.

(2.) Alt-A (also referred to as "A-minus") is a way lenders have of grading or categorizing a loan. Alt-A has traditionally been used to designate borrowers whose credit scores are somewhat below those of A-grade borrowers, typically under 680.

(3.) Loans that have less than full documentation - Also referred to as low doc/no doc loans.

Example Alt-A Borrower

House Purchase: $400,000

Credit: 760 FICO

Income: $75,000

Money Down: $0

Mortgage Payment based on 7% blended rate: $2,800

Back End Debt to Income Ratio: 50% 

Assets: $12,000

Illustrated in the red are the glaring issues with the loan- all cloaked by the fact the borrower has an outstanding credit score. Despite having only 3 months savings and no equity in the property, this borrower in say 2005 would have been able to finance their entire value of their home, and in many case could do it without having to show any income or asset documentation.

Surprisingly the above example is what a bank would consider a strong example of an Alt-A borrower. Alt-A represented borrowers on the credit spectrum all the way down to 620. 

Bankapedia's Take

During the Mortgage Boom and prior to the bust, Alt A mortgages has become a wall street darling. Investors that backed these mortgages figured that they provided the best mix of risk and return. Alt-A mortgages didn't always represent below 700 credit, it just meant that the borrower was deficient in one or several areas.  If you look at the large portion of high value foreclosures, the majority were most likely financed as with an Alt-A loan, as they had the ambition and credit score to get the big home, but had no recourse if they lost their job, and the value of their home declined.