Prime Mortgage Woes Looming

Good news, the sub-prime mortgage crisis seems to be over, although looming just around the corner, the prime mortgage crisis, so will this hurt less? No, not really.

As the economic slump continues so does the rising rate of joblessness, and of course an increasing toll on the nation’s most credit-worthy borrowers, who are now struggling with their first time buyer mortgages and credit-card payments at a faster pace than people with poor financial histories. Even those who were frugal with their money are starting to feel it.

“The subprime pain is in the rearview mirror,” says Sanjiv Das, head of Citigroup Inc.’s mortgage business bank, which is seeing delinquencies rise among prime borrowers, who make up three-quarters of its mortgage portfolio.

HSBC Holdings PLC, which was one of the first banks hit by a wave of subprime defaults in the U.S, if that was not bad news enough for them, them are claiming that if the same happens again that their portfolio of prime credit-card loans would perform even worse than its subprime group.

If anything, the recession is much worse for prime borrowers in the long run, declining home prices have taken away one of the typical crutches for them since it is harder to tap the equity in their homes to pay their bills if they lose their jobs, as well as the threat of losing the value in their homes making a losing investments as well as having to deal with the debt of buying it.

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.

“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 corporate banker.