The consumer credit outlook for 2007 looks benign. Although mortgage delinquencies and foreclosures are rising, they are up from exceptionally depressed levels. There was little room for them to go anywhere but higher.

According to the Mortgage Bankers Association survey, delinquencies for all mortgage types rose from a 2005 first quarter low of 4.31% to 4.67% in the fourth quarter of 2006. Default rates now hover around 1.00%. Aggregate numbers still do not fully reflect the impact of the 2005 hurricanes in disaster areas, where Fannie Mae, Freddie Mac and other large lenders directed their servicers not to report borrowers as delinquent.

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