The statement that 'The mortgage borrower has a higher back-end income ratio' in the context of prime mortgages is incorrect. Prime mortgages are typically characterized by borrowers with lower back-end income ratios. The back-end income ratio measures total monthly debt expenses (including debt payments, credit card payments, interest expenses, and insurance expenses) as a percentage of total income. The lower these ratios, the lower the probability of default on the mortgage. Therefore, prime mortgages, which are considered less risky, typically involve borrowers with lower back-end income ratios, contrary to the statement made.

Statement I is correct: Prime mortgage borrowers typically have a lower front-end income ratio, meaning they spend a smaller proportion of their income on housing expenses. This makes them less risky to lenders.

Statement II is incorrect: Prime mortgage borrowers generally have lower back-end ratios, not higher ones.

Statement III is correct: Prime mortgages typically have lower loan-to-value (LTV) ratios, which is another factor that makes them less risky.

Therefore, only Statement II is incorrect, making Choice B the correct answer.