NEW YORK – U.S. mortgage delinquencies edged down in the third quarter from the prior quarter as the economy improved, while newly initiated foreclosures were unchanged, the Mortgage Bankers Association (search) said Thursday.
The mortgage delinquency (search) rate was 4.41 percent at the end of the third quarter, down modestly from 4.43 percent at the end of the second quarter and down even more from 4.65 percent a year ago, the mortgage industry group reported.
The figures are seasonally adjusted and apply to one-to-four unit residential properties.
The new-foreclosure rate on mortgages was 0.39 percent at the end of the third quarter, unchanged from the prior quarter, the MBA said. The inventory of loans in the foreclosure process (search) edged down to 1.14 percent from 1.16 percent.
"The continued modest declines in both delinquencies and foreclosures reflect the strong pace of economic growth and its steady, modest job creation," said Doug Duncan, MBA's chief economist, in a statement. "We expect this trend of modestly declining delinquencies and foreclosures to continue."
Delinquency rates fell in the third quarter for all types of mortgages except those held by subprime borrowers, the MBA said.
The subprime delinquency rate rose to 10.39 percent in the third quarter from 10.04 percent in the prior quarter. However, the subprime delinquency rate was down from 11.74 percent in the third quarter of 2003.
Subprime mortgages are growing as a share of the total mortgage market pie but still account for only about 10 percent of all mortgages, Duncan said during a conference call with reporters.
"There is no question this is a place to watch," Duncan said, regarding monitoring the strength of the mortgage market.
Growth of the subprime part of the market will likely slow anticipated downward trends in delinquencies and foreclosures because they are riskier loans by definition, Duncan said.
The subprime market offers people a place to work toward becoming prime borrowers, Duncan said.
"This opens up credit opportunities for people who did not get credit before," Duncan said. "We view this growth as a positive."
The new foreclosure rate of subprime loans rose to 1.36 percent in the third quarter from 1.18 percent in the second quarter, the MBA said. The rate for prime loans edged down to 0.18 percent from 0.19 percent.
The overall delinquency rate jumped in Florida in the third quarter, which is likely due to four hurricanes that hit the state, Duncan said. Florida has had relatively low delinquency rates in recent years, helped by soaring property values, he noted.