Prime Mortgage Loan Defaults Rise
Over the past year, home mortgage loan defaults have been making their way through varying qualities of mortgage. First to go bust, racking up high numbers of foreclosures, were the subprime loans. Then, a few months ago, Alt-A loans started joining the ranks of mortgage loan defaults. Finally, though, the economy has caught up to those with prime mortgages. And now, reports LoanPerformance, prime mortgage loan defaults are on the rise.
Prime mortgages are those mortgages given to people with good credit and favorable debt to income ratios. They are home mortgage loans that have the best interest rates, and the borrowers that have been rated most likely to pay. Unfortunately, some of those who could afford their home mortgage loans can’t anymore. A rising unemployment rate, inflation and other issues have caught up with some borrowers, and prime mortgage loan defaults are on the rise.
And, of course, prime mortgage loan defaults will have their own effects on the recovery of the housing market. CNN Money reports on the influence that prime mortgage loan defaults are likely to have:
The failure of prime mortgages will also make it more difficult for new borrowers to find affordable loans - and that will slow sales even more. Lending standards have been tightening for months, but if prime loans start to look risky, lenders will be even more conservative about who gets a mortgage.
About 60% of the loan officers surveyed reported that they tightened lending standards for prime mortgages during the first three months of 2008, according to the April 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve, which is released quarterly.
So, with these high quality home mortgage loans causing problems, it appears that the mortgage market may not recover anytime soon. Lenders are wary of making new home mortgage loans, and are tightening standards, leading to a further increase in supply as more homes remain on the market due to a lack of qualified buyers.
Tags: Alt-A loans, mortgage defaults, home mortgage loans, subprime mortgages,
prime mortgages, prime mortgage loan defaults, mortgage loan blog
