Performance Outlook Mixed.

WASHINGTON -- While the national delinquency rate edged lower in the second quarter, underlying numbers may portend a long-term trend toward higher overdue rates.

Overall, 4.39% of home loans were at least 30 days late at the end of June, down two basis points from the end of March but still slightly higher than one year earlier, according to the Mortgage Bankers Association. Nationally, the percentage of seriously delinquent loans - those 90 or more days past due or in foreclosure - declined four basis points to 1.89% at June 30.

But in a conference call, MBA chief economist Douglas Duncan said that improvement on the Gulf Coast resulted in a "somewhat artificial decline in the national delinquency rate" relative to the first quarter.

But Mr. Duncan said the overall momentum continues to suggest upward pressure on delinquency and foreclosure rates. Mr. Duncan said both the economy and the housing market "decelerated" during the second quarter, with the pace of job growth and home price appreciation slowing. Rising interest rates and a larger inventory of homes for sale have combined to hold down price gains.

After years of record-setting home sales, the MBA expects to see about a 12% decline in the total volume of new and existing home sales this year. Moreover, the MBA has sharply reduced its expectations for home price growth this year to about 3.5%, down from a previous expectation that home prices nationally would rise by 6% or 7%.

In addition, the aging of loans originated during the refinancing boom and higher energy prices also have put upward pressure on delinquencies, even as "generally healthy economic growth and labor markets" have helped keep delinquencies down, Mr. Duncan said.

"However, we are seeing increases in delinquency rates for subprime loans, particularly for subprime adjustable-rate mortgages. It is not surprising that subprime borrowers are more susceptible to these changes," Mr. Duncan said.