The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.
Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.
The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.
Read Housing Lenders Fear Bigger Wave of Loan Defaults at nytimes.com
Before Ronald Reagan and Bill Clinton destroyed America's economy with deregulation, a family would work hard, secure a mortgage, buy a home and become full participants in the American Dream and the vibrant American economy.
Unconventional mortgages have always existed, and they were always sold to people whose credit and income was "borderline." They were out-of-the-ordinary.
After deregulation, banks and other lenders abandoned the conventional mortgage in favor of the quick-profits potential of unconventional mortgages.
So, now it is not just people with sub-standard credit and income who are losing their homes to bad mortgages, now people with perfectly good credit and incomes are losing the battles against bad mortgages.
I know the so-called "conservatives" will say 'it's their own fault' for signing such bad mortgages; but, I argue that a civilized nation doesn't allow such business practices.
Nobody in 2008, however, would accuse America of being civilized.