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Mortgage delinquencies jump in 3rd quarter

Delinquencies on U.S. home mortgages rose in the third quarter due to the displacement of people by Hurricane Katrina but they fell from a year earlier as the economy improved, an industry group said on Wednesday.
/ Source: Reuters

Delinquencies on U.S. home mortgages rose in the third quarter due to the displacement of people by Hurricane Katrina but they fell from a year earlier as the economy improved, an industry group said on Wednesday.

The rate of homes entering the foreclosure process edged up last quarter from a year earlier, and this is likely to grow once the effects of Hurricanes Katrina, Rita and Wilma are reflected, according to the Mortgage Bankers Association.

Many lenders are delaying pushing delinquent loans into foreclosure as a means of hurricane relief. Katrina was the costliest U.S. natural disaster and it was quickly followed by Rita and Wilma, MBA noted in its report.

Hurricane fallout, rising interest rates and their impact on adjustable-rate mortgages, and higher energy costs could squeeze homeowners further in coming months, MBA Chief Economist Doug Duncan said in a conference call.

But the improving economy is creating more jobs, which will temper rising delinquencies and foreclosures, he said.

"At the end of the day the most important criteria are job growth and real income growth," said Duncan.

The mortgage delinquency rate rose to 4.44 percent in the third quarter from 4.34 percent in the second quarter but fell from 4.54 percent in the third quarter of last year, it said.

New foreclosures on homes edged up to 0.41 percent in the third quarter from 0.40 percent a year ago. The hurricanes' impact will likely boost delinquencies and foreclosures for at least the next few quarters, according to the MBA.

These figures are seasonally adjusted for one- to four-unit residential properties.

Delinquent loans rose sharply in Louisiana and Mississippi during the quarter because of destruction from the storms, which slammed the U.S. Gulf Coast in August and September.

Delinquencies for all loan types, however, were lower in the third quarter once hurricane effects were eliminated.

"The overall U.S. economy grew at almost 4.3 percent in annualized real terms during the third quarter of 2005, adding 147,000 payroll jobs per month," Duncan said.

Still, rising interest rates and high energy costs could keep more homeowners from making timely loan payments.

Home loan applications drop
Mortgage applications decreased last week, dragged down by sharp decline in home refinancings to a 17-month low as interest rates held near the highest levels of the year, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended Dec. 9 decreased 5.7 percent to 619.3 from the previous week’s 656.7.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.28 percent, down 0.04 percentage point from the previous week’s 6.32 percent.

The 30-year fixed-rate mortgage, the industry benchmark, is substantially above its 2005 low of 5.47 percent in late June and close to its high of 6.33 percent in the week of Nov. 11.

The group’s seasonally adjusted index of refinancing applications dropped 9.7 percent to 1,441.8 compared with 1,596.4 the previous week. Volume was at its lowest level since the week ended June 25, 2004, when the index reached 1,386.9.

The MBA’s also reported that its seasonally adjusted purchase mortgage index fell. It dropped 3.5 percent to 477.9 from the previous week’s 495.1. The index is considered a timely gauge on U.S. home sales.

Analysts and economists say the steady climb in interest rates in recent months may have finally starting cooling the housing sector.

Fixed 15-year mortgage rates averaged 5.83 percent, down from 5.84 percent the previous week. Rates on one-year adjustable-rate mortgages climbed to 5.50 percent from 5.49 percent.

The MBA’s survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.