Economist Says Don't Fret about Rising Foreclosure Trend.(mortgage forecast)

Charlotte, NC -- A top housing economist took a group of real estate reporters to school here late last month, explaining, among other things, why they shouldn't panic when delinquency and foreclosure rates move higher, as they inevitably will.

"There's no question that late payments will rise," Doug Duncan, chief economist at the Mortgage Bankers Association, told the journalists. "But it's not going to be a disaster."

It won't be that big a deal when the repossessions rise, either, Mr. Duncan said at the National Association of Real Estate Editors annual conference here, explaining that the percentage change in the foreclosure rate is a far more important indicator than the absolute number.

"The number of foreclosures is absolutely going to go up," he said. "But the percentage could fall."

Equally as important, the housing economist added, is that the mortgage market "has already priced in" the fact that take-backs "have to go higher."

Mr. Duncan said given that over half the mortgages on the books today are less than three years old, and the probability that a loan will go delinquent is highest in the third through the fifth year, it's "almost guaranteed" that the rate of late payments will rise in the coming months.

He also pointed out that shift to adjustable-rate mortgages that followed the end of the recent refi boom is another portend of rising delinquency rates.