'Red Flags' Are Seen.(McDash Analytics notes reduction in outstanding mortgages)(improvement in delinquency rates)

Denver -- Sure, delinquency rates have been falling on a national level, but not everyone sees a picture of credit quality that is universally rosy.

McDash Analytics here, a company that slices and dices large pools of loan level mortgage data, notes that heavy refinancing activity in recent years has reduced the age of outstanding mortgages. Many have not yet entered their peak period of default risk.

"On an absolute basis, delinquencies remain low. But we all know that delinquencies ramp up," said Ted Jadlos of McDash Analytics.

He notes that the delinquency rate on loans originated in 2004 is almost as high as the overall delinquency rate for all loans outstanding, a fact that raises concern given how young that portfolio is. It suggests that the 2004 vintage could be a problem spot down the road.

The trend is true for both 30-year and 15-year mortgage loans originated in 2004.

And that may not be surprising, given that average credit scores declined slightly for loans made in 2004 and 2005.

"I think the big trend is that if '04 is already more delinquent than '03, that's a sign that something is happening in the industry," Mr. Jadlos said.