In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.
It was never just a subprime problem, though it has been more of a lower end of the market problem, and at this point in time it's absurd for a reporter to speak of it that way.
Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.
“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”
If this is the third wave, then there will also be a fourth, when option ARM rates start recasting. Good thing the banksters got rid of bankruptcy cramdown, because we'll get to bail them out again.