Foreclosed signs no longer just the province of the other half.
Here’s a term that we’re all going to become way too familiar with: Jumbo prime mortgages.
Reuters: Many of America’s wealthier homeowners are already feeling the pinch. According to research firm First American CoreLogic, in August 2008, 5 per cent of U.S. jumbo prime mortgages — those over $417,000 — were behind payments 60 days or more.
That was higher than the 3 per cent of normal prime mortgage loans 60 days or more behind, but well below the 29.5 per cent delinquencies seen for subprime loans, or the 15.4 per cent rate for Alt A mortgages, which are a step above subprime.
But that 5 per cent rate for jumbo delinquencies was more than three times the 1.4 per cent rate in August 2007.
“Jumbo prime mortgages have seen the biggest increase in delinquencies of any category over the past year,” said Sam Khater, chief economist of First American CoreLogic. “The worst affected areas are states like California that have seen sharp price declines. But few areas are unaffected,” he said.
The squeeze many wealthy Americans find themselves in is that they borrowed far too much against those homes.
…”People have seen the value of their assets, including stocks, decline. But their debts haven’t,” he said.