Prime Mortgage Holders Took a Beating in 2009

The Comptroller of the Currency keeps an eye on the mortgage market, and the results continue to be terrible. They monitor 64 percent of the mortgages in the United States, or 34 million loans, from most of the mortgage servers in a portfolio representing the larger market: About two-thirds of the mortgages they monitor are “prime” mortgages, or mortgages issued to people at favorable rates based on their relatively high credit scores (which are, of course, a measure of people’s statistical credit-worthiness). But while most of the attention has been paid to the delinquencies from subprime mortgages, the Comptroller’s report on mortgages through 2009 sheds a sobering light on the largest group of borrowers who are behind on their mortgages: prime mortgagees.

Before the fourth quarter of 2008, there were always more subprime than prime mortgages in severe delinquency, defined as more than 60 days past due for regular mortgages or more than 30 days overdue for mortgages held by bankrupt borrowers. While delinquencies were and remain a larger percentage of the much smaller subprime portfolio (which is, after all, why those borrowers are considered subprime), in the fourth quarter, the sheer volume of prime mortgage delinquencies overtook subprime for the first time. The newest report shows that 2009 was not kind to prime mortgage holders, as nearly one million of them were in severe delinquency. That represents a 76 percent increase over just a year before, and is more than double the number of subprime mortgages in severe delinquency.

While the mortgage crisis — and the efforts to find solutions for it — has often revolved around the subprime market, the subsequent economic crisis, unemployment and plummeting home values have taken a severe toll on even the borrowers judged most credit-worthy only a few years earlier. Severe delinquencies lead to bad marks on one’s credit report, lowering credit scores and driving more people into subprime credit territory.