Magazine article American Banker

Delinquency Still Falling - but for How Long?

Magazine article American Banker

Delinquency Still Falling - but for How Long?

Article excerpt

Residential mortgage delinquencies and foreclosures continue decline despite higher interest rates. Economist and lenders say the decreases can be attributed to the recent home-loan refinancing boom and a strong national economy.

According to the Mortgage Bankers Association of America's quarterly survey, the seasonably adjusted delinquency rate of an loans in the third quarter fell to 3.9% - the lowest level in 21 years. That's down 31 basis points from the second-quarter figure.

Every region and loan type experienced a drop in the delinquency rate. Only foreclosure rates in the western region climbed in the third quarter - just 3 basis points, to 0.94%. Foreclosures are largely a trailing indicator. Most economists were surprised - not so much by the decline in delinquency, but by its size.

"This is the time you certainly expect good credit quality," said Gary Gordon, a PaineWebber Inc. analyst. He said stellar job growth and a robust economy has buttressed borrowers.

Robert R. Davis, chief economist for Savings and Community Bankers of America, said the recent refinance boom over the last few years has dramatically reduced the monthly mortgage payments borrowers make. He said that has kept borrowers on steady financial ground and contained any growth in delinquency rates.

Joe Pickett, president of the mortgage bankers group, "guesstimates" that 80% of all one-to-four-family loans in lenders' portfolios today are less than three years old, and they are receiving an average interest rate of 8%.

Gary L. Ciminero, chief economist, Fleet Financial Group, Providence, R. …

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