The news that’s perhaps getting the most water-cooler buzz in the industry right now is Countrywide’s disclosure that it’s having some problems with prime home equity mortgages as the housing slump continues — to say nothing of a near 24 percent delinquency rate on the subprime mortgages it services. I’ve even seen a report from Rueters which noted that Countrywide pulled out a Great Depression comparison in its earnings call today. That’s the sort of language usually reserved for doomsday when we’re discussing Wall Street. Which leads us to Federal Reserve Bank of Philadelphia president Charles Plosser, who said the following today in an interview with the Wall Street Journal:

“If I started to see some of the spillovers occur in some of the prime mortgages, I’d get more nervous,” Federal Reserve Bank of Philadelphia president Charles Plosser said in an interview with The Wall Street Journal Tuesday.

So what happens when the Wall Street Journal runs a lead that reads Countrywide Shows Even Prime Loans Are Beginning to Sour? Perhaps it’s time for Plosser — and the rest of us — to be very, very concerned:

By laying the blame for its earnings shortfall on rising defaults of prime home-equity loans — many taken out by people who were straining to afford a house and didn’t fully document their income — Countrywide undermined the popular notion that only subprime borrowers are falling behind. And that could have a broad, negative impact on lenders’ stocks.

BTW, it certainly looks as if company insiders have been worried sick for the past few months, as the WSJ blog MarketBeat noted today. The worse-before-it-gets-better mantra appears to be on the money, but the question is how much worse? I’m still a strong believer in underlying asset performance, as most HW readers know: and based on those measures, it appears that the worst is still yet to come in the back half of this year. Where we go from the fourth quarter is really a crapshoot at this point — because so much of direction in the intermediate term will hinge on the direction of the general economy, which doesn’t move independently of the mortgage and housing markets.