Lenders See New Wave of Prime Defaults

Bigger group of 'good' borrowers now face foreclosure
By Jim O'Neill,  Newser User
Posted Aug 4, 2008 8:11 AM CDT
A bank owned home is seen for sale in Sacramento, Calif.    (AP Photo/Rich Pedroncelli, file)
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(Newser) – The flood of foreclosures on subprime mortgages seems to be ebbing, the New York Times reports, but a second, larger group of borrowers—those with better credit—are now expected to default in coming months. A continued weak economy, unemployment, and other economic factors helped to quadruple the percentage of borrowers one rung above subprime who defaulted in April, compared with the year before, and double the percentage of prime market borrowers who defaulted.

Problems in the broader mortage market may continue to climb for as long as 2 years, analysts predict, as monthly payments continue to rise and home values fall. Tightened lending standards will make it harder for people to refinance loans or find buyers for their homes. “Subprime was the tip of the iceberg,” says one. “Prime will be far bigger in its impact.”