Mortgage Crisis Hits Prime Loans
Although the figures remain relatively small, mortgage delinquencies have now spread beyond subprime borrowers to prime borrowers, according to a front-page article in the May 9 -11 edition of USA Today.
According to data from FirstAmerican CoreLogic LoanPerformance, approximately 2.3 percent of prime loans were 60 days past due in February, up from 1.4 percent a year ago. The foreclosure rate for prime borrowers is also up. Mortgage Bankers Association says that the rate of foreclosure filings for prime ARMS (adjustable-rate mortgages) rose from 0.41 percent to 1.06 percent. Prime ARMS constitute 15% of loans outstanding and 20% of foreclosure filings.
Prime borrowers are being hit with mortgage woes because of job losses, rising payments as ARMS reset, and falling home prices. Those who owe more on a mortgage than a house is worth are walking away or delaying payments until they determine what to do.
Economist Brian Bethune of Global Insight suspects that delinquencies on prime loans have risen further since February. "We're seeing the prime area coming under pressure, with delinquencies moving up," Bethune says.
Prime loans are usually given to those with good credit. February’s data reflects the highest level of delinquency reported for prime borrowers in a decade. A continued rise in the delinquency rate for prime borrowers could prolong the housing crisis.
