The PrimeX indexes, which track the performance of mortgages taken out by credit-worthy, or prime, borrowers from 2005 to 2007, have fallen an average of 5% in a little over a month as trading volume has jumped. The prolonged slide in the housing market has sparked worries that many prime borrowers will be left with houses worth less than what they owe on their large, or jumbo, mortgages. Some investors, and ratings firms, are becoming concerned that the default rate on these mortgages is likely to climb as borrowers walk away from their homes. Over 50% of prime jumbo-mortgage holders currently owe more than the house is worth, according to Moody’s Investors Service. Moody’s this week said that the prime jumbo-market segment of the residential mortgage-loan sector now faces a greater risk of strategic defaults, than other sectors.
Index Tracking Prime Mortgages is on the Decline
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