Home loan delinquencies rose during the second quarter, despite signs of improved credit quality in other types of consumer loans.
The Mortgage Bankers Association of America reported Wednesday that 4.39% of all home mortgages were past due by at least 30 days in the second quarter, up 10 basis points from the previous quarter. It was the second consecutive quarterly rise in the widely followed measure. The trade group attributed the increase to sluggish economic activity in the first half
Conflicting Data
But the rise clashed with some other data about consumer debt. MasterCard International. for example, recently reported that U.S. card delinquencies fell in the second quarter to a 10-year low.
Mortgage delinquencies, too, are running low by historical standards. But economists nonetheless expressed concern about the latest rise.
"It's an ominous sign." said Gary Ciminero, chief economist at Fleet Financial Group.
Perhaps most worrisome was a surge in delinquency among loans insured by the Federal Housing Administration. Some 7.43% of these mortgages were past due in the second quarter, up 54 basis points from the previous quarter, the trade group said.
Mortgages insured by the Veterans Administration also posted a sharp jump in delinquency, while the rate for conventional loans held steady at 2.74%.
"People in the FHA and VA programs have less resources to fall back upon and are more vulnerable to job loss," said Cynthia Latta, senior financial economist at DRI/McGRAW Hill.
But the Mortgage Bankers Association said the problems in government-insured loans stem from policy changes that have driven more and more creditworthy borrowers to conventional mortgages.
The FHA, the trade group asserted, "has increasingly become the insurer of last resort." (See related story, page 10.)
FHA officials could not be reached for comment.
Biggest Jump Was in West
All regions of the country posted rises in mortgage delinquency, but biggest jump came in the West - up 21 basis points to 3.72%.
Economists offered varying explanations for why mortgage delinquency is on the rise at a time when other tupes of consumer credit are improving.
Mr. Ciminero thinks that mortgage delinquencies are a lagging indicator - they "keep cascading upward after a recovery ends."
Lynn Reaser, chief economist at First Interstate Bancorp, was more pessimistic.
"I'm not at all surprised that mortgage delinquencies are on the rise, but I do wonder if the improvement in [other consumer loans] can be sustained," she said.
