U.S. mortgage delinquencies lowest in 4 years

By Richard Leong

NEW YORK, June 14 (Reuters) - U.S. mortgage delinquencies slipped in the first quarter of 2004 to their lowest level in nearly four years, helped by a robust housing market and improving job conditions, a U.S. mortgage industry group said on Monday.

The Mortgage Bankers Association said its measure of outstanding mortgages that were delinquent fell to 4.33 percent on a seasonally adjusted basis for the first quarter from 4.49 percent in the fourth quarter and 4.85 percent a year ago.

The first-quarter delinquency reading is lowest since 4.11 percent for the second quarter 2000, according to a spokesman for the group.

"An expectation of strong job growth for the rest of the year and continued strength in the housing market bodes well for lower delinquency and foreclosure rates in the upcoming quarters," Douglas Duncan, the group's chief economist, said in a statement.

The percentage of one- to four-family homes in foreclosure dipped to 1.27 percent in the first quarter from the fourth quarter's 1.29 percent and a year-ago rate of 1.43 percent, the Washington-based group said.

The percentage of new foreclosures rose 1 basis point from the fourth quarter to 0.46 percent. The percentage of new foreclosures was 0.41 percent for the first quarter of 2003, it said.

The Mortgage Banker Association's latest quarterly survey on mortgage delinquencies and foreclosures was based on a sampling of 37.6 million loans.

The recent spurt of job growth should help drive mortgage delinquencies and foreclosure inventory lower, Duncan said in a conference call on the survey, adding that banks and mortgage lenders should not worry about writing off losses as mortgages go bad.

"The core of the mortgage portfolio out there is in very good shape," Duncan said.

As expected, "subprime" borrowers, or people with low income or spotty credit histories, continued to fall behind on their mortgage payments at a rate several times higher than their prime counterparts.

For the first quarter, delinquency rate on loans made to subprime borrowers was at 11.19 percent, down from fourth quarter's 11.59 percent and from 12.4 percent a year ago, the group said.

Delinquencies on prime mortgages was at 2.26 percent for the first quarter, down from fourth quarter's 2.40 percent and year-ago's 2.62 percent.

Although the U.S. mortgage industry is solid, the recent spikes in energy prices and mortgage rates could put pressure delinquencies and foreclosures down the road, Duncan cautioned on the conference call.

Higher prices for home heating and gasoline will hit household budgets, while rising mortgage rates could strain borrowers with adjustable mortgages whenever their interest rates reset at higher levels, he said.

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