Fewer home loans are going bad these days, the Mortgage Bankers Association said Friday in its quarterly delinquency report.
Calling the finding surprising, the trade group interpreted it as a signal that the housing markets are healing.
"We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007, continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding, and culminated with a recession that saw 8.5 million people lose their jobs," Jay Brinkmann, the group's chief economist, said in a statement.
Mike Larson, a real estate and interest rate analyst at Weiss Research, called the report an encouraging indicator "pointing toward broad-based stabilization," but he cautioned about overreacting to the good news.
"This is a key sign that housing market conditions are slowly, grudgingly, getting slightly better," Larson said. "This does not mean we'll have a vigorous recovery. We won't. Many loan mods will fail, the unemployment rate remains elevated, and lending standards will remain relatively strict for some time."
The Mortgage Bankers Association said the delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 9.47 percent of all loans as of the end of the fourth quarter of 2009, from 9.64 percent in the third quarter.
Such a decline is exceedingly rare, Brinkmann said in a conference call, because consumers in the fourth quarter are buying Christmas presents and face a rise in heating bills.
Loans delinquent by 30 days and by 60 days declined compared with the third quarter of 2009 and the fourth quarter of 2008. The number of loans going into foreclosure, though up from a year earlier, declined compared with the third quarter as efforts to modify mortgages took hold.
But the "bucket" of loans more than 90 days past due — containing the mortgages being evaluated for modifications — continued its rise to record levels, indicating that there is still much short-term pain for the housing markets to endure as many of these fall into foreclosure.
The group said 4.99 percent of all prime fixed-rate loans — the kind made to the best-qualified borrowers — were categorized as seriously delinquent (that is, in foreclosure or more than 90 days past due), up from 2.25 percent a year earlier.
For prime adjustable-rate loans — the category containing tricky pay-option mortgages — 18.13 percent were seriously delinquent, compared with 10.45 percent a year earlier.
And 42.7 percent of subprime adjustable loans were seriously delinquent, up from 33.78 percent in the fourth quarter of 2008.
Brinkmann noted that the mortgage trends mirror those in the job market, where the number of long-term unemployed remains high while new unemployment claims have been declining.