The number of US prime borrowers behind on home loan payments has risen sharply, signalling further problems for banks and investors.
Standard & Poor's said higher unemployment combined with a prolonged housing market slump had afflicted even the highest quality borrowers.
The dollar volume of prime mortgages in delinquency or default rose 13.8 per cent between March and June, according to a study of private-label prime, subprime and Alt-A home loans conducted by S&P. Borrowers of Alt-A loans have slightly better credit histories than subprime borrowers.
These three categories of mortgages, totalling $1,620bn, are not backed by government-sponsored enterprises Fannie Mae and Freddie Mac, but were originated by banks, packaged into securities sold to investors.
"Today's prime borrower is far more at risk than the prime borrower of any other cycle," said Michael Thompson, managing director of market, credit and risk strategies at S&P. "If unemployment continues to get worse, this is where you will have the greatest vulnerability and it may not yet be factored into the valuation of residential mortgage-backed securities."
Prime loans have less than half the originally securitised loan balance outstanding, after prepayments and losses, and the lowest amount of non-performing loans. But analysts say the growth in problem prime loans could signal trouble for the much larger "conforming" prime loan market. These are loans backed by Fannie Mae and Freddie Mac.
By Nicole Bullock and Saskia Scholtes in New York
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