Rise in mortgage delinquency rate feared
By Jeannine Aversa
Associated Press
WASHINGTON — Fewer homeowners were late paying their mortgages in the final quarter of 2002, but economists worry that a worsening job market could be making that more difficult now.
The seasonally adjusted percentage of mortgage payments 30 or more days past due for all home loans dipped to 4.53 percent in the fourth quarter of last year, down from 4.66 percent in the third quarter, the Mortgage Bankers Association of America reported Monday.
The delinquency rate does not include foreclosures.
Decades-low mortgage rates are helping homeowners handle their mortgage debt, economists say. The dip in the fourth quarter's delinquency rate came as personal bankruptcies hit a record high in 2002.
Still, Doug Duncan, chief economist at the Mortgage Bankers Association of America, said he's concerned about the impact that the recent deterioration in the labor market will have on home-mortgage delinquency rates.
"Employment is such a driver of delinquencies," Duncan said.
If house prices continue to slow, the job market gets worse and the economy doesn't pick up, "That will make it more difficult for households to work out troubled loans," Duncan said.
In February, the nation's unemployment rate rose to 5.8 percent as the economy eliminated 308,000 jobs. That marked the biggest cut in payrolls since November 2001, when the country was reeling from the spillover of the Sept. 11 terror attacks.
Private economists believe the jobless rate will move higher in coming months, given forecasts for lackluster economic growth.
The Mortgage Bankers survey also showed that the percentage of home loans that began the process of foreclosure in the fourth quarter of 2002 dropped to 0.35 percent, down from 0.37 percent in the third quarter.
While that represented a small decline in new foreclosures in the final quarter of 2002 from the previous quarter, the percentage of all loans in the process of foreclosure rose to 1.18 percent, a record quarterly level. That surpassed a previous record of 1.15 percent, reached in the third quarter of that same year.
Duncan said he hoped those figures meant that foreclosures may be peaking. But given the stagnant job market situation, that may not be the case, he said.
"We are not out of the woods," Duncan said.
Last week, the average interest rate on a 30-year fixed-rate mortgage rose to 5.79 percent, from a record low rate of 5.61 percent the week before, according to Freddie Mac, the mortgage company.
Low mortgage rates propelled home sales and home-mortgage refinancing activity to records last year. As consumers swap higher-interest-rate home loans for lower-interest-rate ones, the extra cash has helped to support consumer spending. So have rising home values.
Federal Reserve Chairman Alan Greenspan said this month he expected the housing market to cool a bit this year, which would slow consumer spending, one of the main forces fueling the economy.
Higher mortgage rates would "take some starch out of refinance activity," Duncan said. But he and other economists continue to believe the housing and refinance business will remain healthy.
