Delinquency, Default Rates Creeping Up.(foreclosure)

WASHINGTON -- Delinquency and foreclosure rates rose across the board in the third quarter, providing further evidence that the housing market is in the process of a much-anticipated correction.

Overall, 4.67% of all home loans were 30 or more days past due on a seasonally adjusted basis at the end of Sept., 28 basis points higher than at the end of June.

Additionally, the number of loans in the foreclosure process stood at 1.05%, up six basis points from the second quarter. The number of loans entering the foreclosure process also rose.

The increases were spread across all major loan types, with subprime credit quality and Federal Housing Administration loans showing the most dramatic rise in overdue payments. The increase was also most pronounced among adjustable-rate mortgages, particularly those made to subprime borrowers, and 13.22% of subprime ARM loans were delinquent in the third quarter, up 98 basis points from the second quarter.

But MBA chief economist Doug Duncan said the increase in delinquencies had been anticipated. "It is important to remember that delinquency and foreclosure rates have been quite low the last two years," he said.

Mr. Duncan also pointed out that the market has responded to the rising credit risk in home loans, with investors in the secondary market demanding higher returns in the form of wider credit spreads, particularly ...