WASHINGTON – It's all very well that delinquencies and foreclosures declined during the first quarter this year, but what about those newly-written mortgages that haven't been seasoned yet in the give-and-take of family budgets? What if interest on adjustable rate mortgages rises? Doug Duncan, Mortgage Bankers Association VP and chief economist, was asked that question June 21 when the MBA released its delinquency and foreclosure report for the first quarter of 2005. "We will know over time," he answered. However, "The broad housing market portfolio is very sound. If you look at all homeowners, almost 35% have no loans – either a first mortgage, second mortgage, home equity loan or line of credit debt – against their house. Another 50% or better have a fixed rate obligation on their house. "So you're talking at most about 15% of the market that has adjustable rate products, and about half of that is seasoned." Duncan added that regulators, mortgage insurance companies and even builders have been introducing controls to stabilize the market. Overall, the MBA's look at delinquencies and foreclosures during the first quarter this year found a positive picture. Duncan believes those upbeat trends will continue for a while. The percentage of loans in the foreclosure process was 1.08% at the end of the first quarter, a drop of 21 basis points from the previous year and a dip of 7 basis points from the fourth quarter of 2004. The seasonally-adjusted rate of loans entering foreclosure also declined, down 5 basis points from the previous year and 4 basis points lower than the fourth quarter 2004. "The U.S. economy grew at almost 3.5% in annualized real terms during the first quarter of 2005, adding 180,000 payroll jobs per month," Duncan noted. "Combined with the low interest rate environment, consumers improved their household finances and the percentage of homeowners making their mortgage payments on time increased to nearly 96%. "Economic growth is expected to remain strong over the next couple of years. Likewise, job growth should be steady in the presence of modest interest rate rises. These expectations likely mean we will continue to see moderate declines in delinquencies for the next few quarters." For the first time, the MBA included in its report the "seriously delinquent rate," defined as the non-seasonally adjusted percent of loans 90 days or more delinquent or in the process of foreclosure. Again, the results show a positive picture. In the first quarter 2005, 1.89% of mortgage loans were seriously delinquent. That was 18 basis points lower than the fourth quarter 2004 and 25 basis points lower than the first quarter 2004. -

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