Late Payments and Foreclosure Starts Increased Late Last Year.(homeowners' mortgage payments in 2000)(Brief Article)(Statistical Data Included)

For the second quarter in a row, the number of homeowners behind on their mortgage payments increased, according to the Mortgage Bankers Association of America.

In the third quarter of last year, 4.04% of prime credit quality home loans were at least 30 days delinquent, up 22 basis points from the previous quarter, according to the MBA's National Delinquency Survey. Foreclosure was started on 0.31% of home loans, up a modest 5 basis points from the second quarter, when foreclosure starts were at the lowest level reported since 1987.

Douglas Duncan, chief economist of the MBA, said the increase in delinquencies was expected. He said it reflects loan seasoning, with the large volume of loans originated between 1997 and 1998 approaching their peak period of risk for default. Slowing economic growth is also a factor in the increase.

Slowing income growth, higher unemployment and loan seasoning may continue to put upward pressure on delinquencies, Mr. Duncan said. But the rise in late payments may be tempered if the Federal Reserve begins to ease interest rates.

But Mr. Duncan said that while the 22 basis point quarter to quarter jump in delinquencies may seem large, delinquencies are only up 7 basis points from the third quarter of 1999.

"I expect delinquencies will move up," he said. "It was only two quarters ago that we were at the lowest delinquency levels in 28 years."

The increase in late payments during the second and third quarters have erased 32 basis points of the 71 basis point decline in delinquencies that was tallied between the first quarter of 1998 through the first quarter of 2000.