Foreclosures on prime loans surge

Rising unemployment led to a spike in foreclosures on prime fixed-rate mortgage loans in the third quarter, the Mortgage Bankers Association said Thursday.

Considered home loans with the least risk, prime fixed-rate mortgages accounted for nearly 33 percent of new foreclosures last quarter. That compares with just 21 percent a year ago, when higher-risk subprime loans made during the housing boom were the main reason for default.

About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group.

The report suggests the housing market and broader recovery could be thwarted by the continuing surge in home loan defaults, especially as the unemployment rate keeps ...