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MORTGAGES

Fewer homeowners falling behind on mortgage payments

Delinquency rate at the end of December falls to a seasonally adjusted rate of 9.47% from 9.64% in the third quarter, according to a mortgage bankers group. But troubles are not over, experts say.

February 20, 2010|By E. Scott Reckard and Walter Hamilton
  • A foreclosed house in Homestead, Fla., last year. The number of home loans in the U.S. going into foreclosure at the end of 2009, though up from a year earlier, declined compared with the third quarter as efforts to modify mortgages took hold.
A foreclosed house in Homestead, Fla., last year. The number of home loans… (J Pat Carter / Associated…)

The clouds may be starting to lift, ever so slightly, for the beleaguered housing market.

The latest evidence came Friday, when new data showed that fewer homeowners were falling behind on their home loans.

The delinquency rate for mortgage loans on one- to four-unit residential properties fell to a seasonally adjusted rate of 9.47% of all loans at the end of the fourth quarter of 2009, according to the Mortgage Bankers Assn. That's down from 9.64% in the third quarter.

It's extremely rare for the delinquency rate to decline at the end of the year, when homeowners are grappling with the cost of heating and Christmas presents, according to the trade group.

"We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007 [and] continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding," Jay Brinkmann, the group's chief economist, said in a statement.

However, the data still pointed to a troubled housing market that is likely to worsen before it improves.

The delinquency rate was up from 7.88% a year earlier. And though California is faring better than some other hard-hit states, the state delinquency rate is 11.34%.

"This is a key sign that housing market conditions are slowly, grudgingly getting slightly better," said Mike Larson, a real estate analyst at Weiss Research. "This does not mean we'll have a vigorous recovery. We won't. Many loan [modifications] will fail, the unemployment rate remains elevated, and lending standards will remain relatively strict for some time."

In a sign that delinquencies may be leveling off, the number of loans past due by 30 days and 60 days declined compared with the third quarter of 2009 and the fourth quarter of 2008.

The number of loans going into foreclosure, though up from a year earlier, declined compared with the third quarter as efforts to modify mortgages took hold.

But the portfolio of loans more than 90 days past due -- containing mortgages being evaluated for modifications -- continued its rise to record levels.

That indicates that there is still much short-term pain for the housing markets to endure as many homes fall into foreclosure.

The group said 4.99% of all prime fixed-rate loans, the kind made to the best-qualified borrowers, were categorized as seriously delinquent (that is, in foreclosure or more than 90 days past due), up from 2.25% a year earlier.

For prime adjustable-rate loans, the category containing tricky pay-option mortgages, 18.13% were seriously delinquent, compared with 10.45% a year earlier.

And 42.7% of subprime adjustable loans were seriously delinquent, up from 33.78% in the fourth quarter of 2008.

Brinkmann noted that the mortgage trends mirror those in the job market, where the number of long-term unemployed remains high while new jobless claims have been declining.

scott.reckard@latimes.com

walter.hamilton@latimes .com

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