As the subprime RMBS market continues to face uncertainty, prime loans might be hit next - not surprising given the loose underwriting standards that characterize all of the 2006 vintage. These expectations come amid 2006 vintage resets and increasing concern over Alt-A collateral.

Prime contagion is exactly what is happening, according to market participants. While not overly concerned, observers cite the recent announcements of losses at the higher credit level as well as rising delinquencies among prime loans as indicators of some trouble on the horizon.

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