Mortgage delinquencies declined nationwide in the fourth quarter, according to a survey by the Mortgage Bankers Association of America.
The delinquency rate declined 13 basis points, to 4.24%, the lowest it has been since the third quarter of 1996. The rate has fallen 23 basis points since the first quarter of 1998.
Last year's huge influx of new loans-which still have a 0% delinquency rate-helped bring down the average, said Brian Carey, an MBA economist.
"We had about 12 million mortgages originated in 1998-six million refinances and six million purchases-which made up about 25% of all mortgages outstanding," Mr. Carey said. "With historically low rates, payment burdens have been reduced, and the overall credit quality of portfolios has improved."
Mr. Carey said that lenders can expect the 1998 pool of loans to perform better than mortgages have in the past, improving servicing portfolios.
The association said 1998 was the fourth consecutive year in which adjustable-rate mortgages' share of originations has declined, resulting in a greater concentration of lower-risk, fixed-rate mortgages.
Most of the reported decline was in mortgages 30 days past due, whose delinquency rate fell 10 basis points, to 2.96%. Mr. Carey said this is the most volatile category.
"How can you predict who missed a payment because they forgot?" Mr. Carey asked. "Servicers do not really worry about that category. They are not going to phone you-nobody really monitors it because it's the first warning."
The share of loans 60 days past due declined 1 basis point, to 0.68%, and the proportion of loans 90 days or more past due fell 2 basis points, to 0.60%.
The delinquency rate, calculated by dividing the number of delinquent loans by the total number of loans, fell 14 basis points for conventional mortgages, to 2.79%, but rose 4 basis points for FHA loans, to 8.65%.
"Last year people with FHA loans were more apt to refinance into a conventional loan, rather than back into an FHA loan," Mr. Carey said. "The pool of FHA loans diminished, but the bad-credit borrowers, who could not afford to refi into a conventional loan, stay in the pool, and there is a runoff of better-credit borrowers."
The mortgage association's national delinquency survey covers about 23 million loans on one- to four-unit residential properties. These account for nearly one-half of all residential mortgage loans outstanding in the United States.
