Moody's Downgrades PRIME Mortgage Debt

As if the subprime mortgage market wasn't frightening enough, this morning Moody's has downgraded tranches of prime mortgage debt, based upon rising default rates. Prime mortgages are the ones that 90% of working Americans have securing their home loans. These are supposed to be the good loans! Moody's downgraded $10 trillion of prime mortgages from Aaa to Caa3 today because default rates have risen to 3%. This is surprising, especially in light of the fact that these tranches were created with the estimation that they would never rise to default rates above 1%.