Mortgage delinquencies decreased in the second quarter, and observers said the drop - the second in a row - could signal continued improvement in the second half.
The rate for all home loans fell to 4.35% in the second quarter, according to a survey released Thursday by the Mortgage Bankers Association. That's down from 4.46% in the first quarter and the recent high of 4.48% reached in fourth of 1995.
The rate for conventional loans - those bought by Fannie Mae and Freddie Mac - was 2.8%, down 6 basis points from the first quarter, and the FHA delinquency rate fell from 8.19% to 8.11% in the second quarter. On the other hand, the delinquency rate for VA loans rose 10 basis points from the first quarter.
One of the most encouraging findings of the survey was that delinquencies in the two most serious categories, 60 and 90 days or more past due, declined by 1 basis point and 7 basis points, respectively. The rate of 0.63% in the 90-day or more category is its lowest since 1980.
David Lereah, chief economist of the Mortgage Bankers Association, cautioned that the second-quarter decline in the 90-day category could simply reflect the high number of foreclosures - which take loans out of the delinquency category - in the first quarter.
Mr. Lereah said third-quarter findings will clarify the picture. "If we get a similar number next quarter, we could be in good shape," he said.
Despite the two quarterly drops in the overall delinquency rate, it is still 20 basis points higher than at the end of 1995's second quarter.
From last year to this, quarterly delinquency rates rose for all regions except the West.
Is there room for the delinquency rate to fall further?
A Sanford C. Bernstein & Co. analyst, Jonathan Gray, said he does not expect it, largely because of the economic turnaround in California.
Mr. Lereah called the findings of the survey "positive" but declined to predict a further drop, citing economic uncertainties.
A strong first-half economy has led to substantial job gains, and interest rates have remained low. But Mr. Lereah said he has noticed upward pressure in mortgage rates and that continued economic strength could lead to a rate hike by the Federal Reserve Board.