The Mortgage Bankers Association last week released its quarterly survey on mortgage loan delinquencies for 4Q04. As of the end of the year, the seasonally adjusted delinquency rate for mortgage loans on one to four unit residential properties was 4.23%, said the MBA, down 26 basis points from 4Q03 and 18 basis points lower from 3Q04.

The MBA also reported that the percentage of loans in foreclosure stood at 1.12% at the end of the year versus 1.29% at the end of 2003, and 1.14% at the end of 3Q04 - the lowest seen since 3Q04. The seasonally adjusted rate of loans entering foreclosure was 0.44% in 4Q04, down a basis point versus the previous year and up five basis points from 3Q04.

By type, the seasonally adjusted delinquency rate fell to 2.22% from 2.37% on prime loans; decreased 15 basis points to 9.88% on subprime loans; was down two basis points to 12.21% for FHA loans; and plunged 103 basis points to 6.96% for VA loans.

The MBA also reported that prime fixed rate loan delinquencies were down seven basis points to 2.04% from a year ago, while prime ARM loans dropped 70 basis points to 2.11%. For subprime loans, fixed rate loan delinquencies plummeted 143 basis points to 9.07%, while ARMs plunged 338 basis points to 9.52% from the end of 2003.

MBA Chief Economist Doug Duncan said that the economic strength and good job growth in the fourth quarter, along with the attractive interest rate environment meant that "consumers improved their household finances and the percentage of homeowners making their mortgage payments on time increased nearly 96%." Citing that the U.S. economy grew at about 4% annually over the quarter with 190,000 payroll jobs added, Duncan stated, "Economic growth is expected to slow slightly, but remain strong over the next couple of years." Duncan also expects to see moderate declines in delinquencies over the next few quarters on the improving economy and job growth outlook as well as a still attractive interest rate environment.

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