Troubles For 'Prime' Borrowers Intensify

[question everything]

Source: WSJ

The long recession and rising joblessness are taking an increasing toll on the nation's most credit-worthy borrowers, who are now falling behind on their mortgage and credit-card payments at a faster pace than people with poor financial histories.

The mortgage-delinquency rate among so-called subprime borrowers reached 25% in the first quarter but appears to be leveling off, rising only slightly in the second quarter. The pace of delinquencies for prime borrowers is accelerating. Since prime loans account for 80% of U.S. bank exposure to mortgages and credit cards, these losses could ultimately exceed those from weaker borrowers... Such delinquencies on mortgages made to prime customers rose 5.8% in the second quarter, compared with a rise of 1.8% among subprime customers. Still, the delinquency rate for prime loans was 6.4%, far below the 25.4% rate for subprime loans, according to the Washington-based trade group.

(snip)

In addition to cutting back on spending, strapped prime borrowers often can keep up with their bills longer than subprime borrowers by draining savings accounts, reducing contributions to retirement plans and turning to family members for money. They also are typically slower than subprime customers to seek help for financial problems because they are concerned about the stigma associated with such assistance, credit counselors say.

(snip)

"They have made adjustments and made adjustments, but then you get to a point where you can't adjust anymore," says Mr. Luzon, who is a former banker. "People who are middle-class wage earners initially may have severance pay and think they have plenty of time to find a job, but then they start using credit cards to support living expenses," he says.




Read more: http://online.wsj.com/article/SB125202003216284895.html

[mbperrin]

1. B-b-b-b-but Glen Butt and the others at Faux News told me

it's all ACORN's fault! They run the country and made the banks lend all their money to poor people,so this story can't be right!!!!

[AzDar]

2. People. Need. Jobs.

Well-paying jobs. There will be no real recovery until they get them.

[imdjh]

4. I keep wondering where the public works projects are- the hiring halls and cattle calls. Where? nt

[WriteDown]

7. Nothing is "shovel-ready" nt

[aquart]

6. Only the CEOs have jobs.

The rest of the hiring is overseas.

[rfranklin]

3. This and commercial real estate will usher in the second crash...

All the financial types are patting themselves on the back, i.e., recession's over, no need to fret because the market's going up, up, up! But hundreds of billions in commercial real estate need to be refinanced and the money ain't there and the vacancy rates are soaring. Top this off with all the prime mortgages that will default in the next six months and you've got another panic on your hands.

[imdjh]

5. Yeah, but the game will be different in the second crash.

Folks with a little cash tucked away will buy the bank stocks on the dip, since they are kicking themselves for not doing that before, and then those banks really will go down the hole.

Or not.