Amid a wholesale reevaluation of risk in the financial markets comes news from UBS AG that the default rate for so-called "Alt-A" mortgages, which are given to people with higher credit scores than subprime loans, has doubled since late 2005.

David Liu, Executive Director of the U.S. Securitized Products Strategy Group at UBS, reported during a symposium at UBS headquarters earlier this week that the default rate in the Alt-A market closely parallels that in the subprime category. But he noted that the default rate for both prime and "agency" mortgages, such as those backed by Fannie Mae, remains both low and stable.

Reached by BIG BUILDER Thursday afternoon, Liu said the problems appear to be at the lower end of the U.S. economic spectrum. "What you have is the bottom half of U.S. home borrowers are having trouble," said Liu.

When asked whether he believed the turmoil in the subprime and Alt-A markets could spread into higher-quality mortgage markets, he said, "I would say if we have a job meltdown, that's certainly possible," he said. "As of now, no."

The UBS analysis shows that although the risk associated with subprime mortgages does appear to be spilling over into the Alt-A category, the impact is not as severe. The subprime category suffers from 10.5 percent delinquency rate, while 2.4 percent of Alt-A loans are 60-days or more past due.

The most serious problems in the Alt-A category are with interest-only mortgages originated in 2006, which UBS estimates are defaulting at a 3.71 percent rate. Liu also pointed to low-documentation loans, those in which borrowers were not required to provide proof of income and net worth, as contributing to the default rate.