What Recession?: Residential Credit Quality Stays Strong.(Brief Article)

When delinquency and default statistics for late 2001 and early 2002 started to trickle in, just about everybody expected to see a rise in delinquencies and defaults on home loans.

After all, foreclosure activity tends to be a lagging economic indicator. Job losses last fall would be expected to turn into defaults later in the year or early this year.

But so far, delinquency and default data have failed to show much of an upturn in late payments that can be attributed to the economic slowdown that began early last year and was exacerbated by the events of Sept. 11.

The Mortgage Bankers Association of America reported that, to the surprise of their own economists, the overall delinquency rate on home loans declined by 22 basis points to 4.65% in the fourth quarter. While the number of homeowners who are at least 30 days past due on their monthly payment remains above its record low from the beginning of 2000, the decline caught experts by surprise.

In the fourth quarter of last year, three quarters after the official start of a recession, the overall delinquency rate was only 15 basis points higher than it had been in the fourth quarter of 2000, near the end of the longest economic expansion in modern American history.

MBA chief economist Douglas Duncan speculated that in this recession, the delinquency numbers may actually be a "leading indicator" that shows a recovery is taking hold.

He believes that unemployment "has pretty much peaked" and that job losses have not hit homeowners as much as in past recessions.