Outlook Remains Bleak.

Byline: Ted Cornwell

Washington-There's little hope to stem the tide of rising mortgage delinquencies and defaults in the short term, according to economists who follow the industry.

Jay Brinkmann, chief economist for the MBA, said that declining home values, which limit the ability of troubled borrowers to sell a home, have increased the "roll rate" of loans that are 30 days delinquent in one quarter that go into foreclosure during the next quarter.

In the 1990s, about 10% of 30-day past due loans moved into foreclosure. Today, about 30% of short-term delinquencies roll into foreclosure, he said during a conference call to discuss the MBA's delinquency survey. Moreover, in hard-hit states, the roll rate is even higher, 75% today in California, for instance.

And with unemployment rising fast, there's little hope for relief in the short term, according to Ryan Sweet, an economist at Moody's Economy.com. He told Mortgage Servicing News that he expects the unemployment rate to rise to 8.5% by early 2010. "Mortgage credit quality is going to decline well into 2009," Mr. Sweet said.

Mr. Brinkmann concurs that fundamental economic factors are now adding to default pressure, which was already heightened by loose underwriting practices during the mortgage boom years, both nationally and in already hard-hit states.

"Clearly the job losses in California and Florida are adding to the problems that already existed with the housing fundamentals in those two states," Mr. Brinkmann said. Nationally, he predicts that job losses will lead to higher foreclosures on prime credit quality loans.