First Sub-Prime Now Prime Mortgage Defaults

First it was sub-prime defaults (although "well contained" Ben Bernanke told us) and now we are seeing credit problems moving up the ladder to prime borrowers. The unwinding of the massive debt bubble will take years, with banks, insurance companies and pensions realizing massive losses. This recession/depression has a long way to go unfortunately.-Lou

S&P downgrades prime jumbo mortgage securities
Ratings cut on 102 classes from 33 prime jumbo MBS deals

SAN FRANCISCO (MarketWatch) - Standard & Poor's Ratings Services said Tuesday that it downgraded several securities backed by large, higher-quality mortgages, a sign the housing crisis has spread well beyond its subprime origins.

S&P said it lowered ratings on 102 classes from 33 U.S. prime jumbo residential mortgage-backed securities that were issued from 1998 to 2004. The rating agency also affirmed ratings on 669 classes from 32 of the downgraded deals, as well as 34 other deals.
"The downgrades reflect our opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings, given our current projected losses," S&P said in a statement.

The financial crisis was sparked by rising delinquencies and foreclosures among less creditworthy home buyers who took out so-called subprime mortgages. However, these defaults triggered a broad, global financial crisis and a punishing recession. Unemployment has soared, which has fueled a second wave of mortgage defaults that's affected all types of home loans.
Prime mortgages are only offered to the most creditworthy borrowers, while jumbo mortgages are larger home loans that still conform to the standards of government-owned finance giants.

Prime mortgages were originally thought to be less vulnerable to housing cycles. Home loans offered before 2005 -- when the lending binge really took off -- were also considered more solid. But the rapid increase in unemployment has undermined these assumptions.