Home loan delinquencies fell sharply in the third quarter, reaching their lowest level in 19 years, the Mortgage Bankers Association of America reported Tuesday.

Analysts said the drop was caused mainly by the refinancing boom, which has significantly reduced the average homeowner's mortgage payments.

According to quarterly figures released by the trade group, the seasonally adjusted rate of delinquent loans dropped to 4.21%, 18 basis points below the level in the second quarter and down 39 points since the third quarter last year.

"For the first time in my nine years here, this is across-the-board good news," said Warren Lasko, the group's executive vice president.

Analysts said other factors contributing to the low delinquency rates were more-stringent lending standards and a strengthening economy.

Continued Improvement Seen

They expect the improvement in delinquency rates to continue as the economy keeps improving and the refinancing wave rolls on.

"The general credit situation really will reflect the strength of the economy, and the economy is clearly strengthening," said John Gibbons, acting chief financial officer of the Federal Home Loan Mortgage Association (Freddie Mac).

The decline in mortgage payments that are at least 30 days delinquent came in all areas of the country. Only California and Pennsylvania showed increases in delinquencies, and even those were narrow. Puerto Rico experienced the most significant drop, 176 basis points.

Across the Board

All types of delinquencies showed declines, including the critical categories of 60 days and 90 days past due, but the biggest quarter-to-quarter decline was a 12-basis-point drop to 2.78% in 30-day delinquencies.

Delinquency rates for government loans fell too. Federal Housing Administration and Veterans Administration latepayment rates dropped 40 basis points since 1992 to 6.17% and 7.03%, respectively.

To lenders, investors, and servicers, that's the best news possible. Richard DeLeo, executive vice president of loan administration at Countrywide Funding Corp., Pasadena, Calif., said an increase in delinquencies and foreclosures raised servicing costs.

|Earning the Maximum'

"Low delinquency means we are earning the maximum we can earn," Mr. DeLeo said. He added that mortgage payments have dropped an average of 25% since the refinance boom began. "Housing is more affordable than it's ever been."

Zan Beckstead, executive vice president of the California Mortgage Bankers Association, said southern California's distressed economy has pushed up the state's overall delinquency rates.

"I am surprised we have not had more problems with delinquencies considering all the jobs we have lost here," Mr. Beckstead said.

Pennsylvania has experienced a fundamental economic restructuring. That has restrained its economy for a long period, said Forrest Pafenberg, director of real estate finance research for the National Association of Realtors.

Delinquency rates match economic conditions elsewhere, too. Strong job recovery and ever-improving economic indicators point to greater loan stability.

But a stronger economy is not the only reason for sinking rates, said Steven Eisman, vice president at Oppenheimer & Co. Stricter lending standards initiated by Fannie Mae and Freddie Mac shortly after delinquency rates hit a high-water mark in 1985 have shaved delinquency rates, he said.

Mr. Pafenberg of the National Association of Realtors said that lender portfolios were now stocked with new loans, which are less likely to be delinquent.

"Just based on that, knowing how old the mortgages are, you would think delinquencies would be down," Mr. Pafenberg said.

Despite the brisk improvements in delinquencies, foreclosures fell only 1 basis point. Analysts say economic upturns take longer to affect foreclosure rates.

Mr. DeLeo of Countrywide said the flat foreclosure rate was "ver serious," showing that people who are in serious delinguency cannot dig themselves out by refinancing.

But most observers believe the outlook remains positive. "When the economy improves, delinquencies start declining," said Mr. Pafenberg. "There is no magic or hidden science to this."

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