When the real estate bubble burst, people were quick to point the finger at subprime Adjustable Rate Mortgages (ARMs). A foreclosure report released by Hope Now, however, shows that prime rate mortgages are now entering foreclosure in larger numbers than remaining sub-prime loans. Were we wrong?

"Here’s a milestone: There are now more foreclosures on prime mortgages than on subprime ones.

"The Hope Now alliance — the lenders’ group put together at the urging of Treasury Secretary Henry M. Paulson Jr — estimates the number of foreclosure proceedings that begin nationally in each month.

"The latest figures, for July, put the number at 197,000, the highest for any month since they started keeping track in July 2007.

"Of those, 105,000 were prime mortgages, and 92,000 subprime. The June numbers also showed more prime foreclosures initiated.

"The Hope Now people report that completed foreclosure sales are still higher for subprime but the gap is narrowing.

"There are far more prime mortgages than subprime, of course, and subprime loans are much more likely to get into trouble. But this does show how the foreclosure problem is spreading.

"One more indication that things are getting worse. Hope Now tracks the number of homeowners it says its members have helped each month to avoid foreclosures against the number of foreclosure sales completed.

"For most of 2007, it figured three homeowners were helped for every foreclosure. Now the ratio is about two-to-one."

Source: "Prime Foreclosures," by Floyd Norris, Copyright 2008 by the New York Times.