A second, far larger wave of U.S. mortgage defaults is building

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is building with alarming speed. With the U.S. economy struggling, homeowners with better credit are now falling behind on their payments in growing numbers. The problems in the broader market may not peak for another year or two, analysts said.

"Subprime was the tip of the iceberg," said Thomas Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. "Prime will be far bigger in its impact."

Delinquencies in prime and alt-A loans are particularly challenging for banks because they hold more such loans on their books than they do subprime mortgages.

[International Herald Tribune]