Loan Performance Holds Steady Even As Economy Cools Down.(Brief Article)(Statistical Data Included)

Even though the home loan delinquency rate declined in the first quarter, the underlying trend may still portend more problem loans, according to the chief economist of the Mortgage Bankers Association of America.

The delinquency rate on one-to-four unit residential properties declined 13 basis points to 4.37% during the first quarter, according to the MBA's National Delinquency Survey. The first-quarter improvement followed three quarters of consecutively rising delinquency rates.

Douglas Duncan, chief economist at the MBA, pointed out that the delinquency rate was 63 basis points higher than it was in the first quarter of 2000, when the overall delinquency rate hit a 28-year low. Delinquencies then rose for three straight quarters before leveling off in the first quarter of this year.

"There is no horror story here, but it's a trend worth watching," Mr. Duncan said.

He said a slowing economy, rising unemployment and seasoning of loans originated in 1998 and 1999 all could contribute to continued delinquency problems.

"We don't expect to see a trend of declining delinquency rates. If I had to guess, I think we'll see a trend of gradually rising delinquency rates for the next two or three quarters."

The percentage of loans on which foreclosure was started increased one basis point to 0.31% during the first quarter, while the percentage of loans that are in the foreclosure process increased five basis points to 0.9%.