While the overall mortgage delinquency rate, at 4.39%, declined by two basis points in the second quarter, underlying data suggest a slight decline in overall credit quality, according to the Mortgage Bankers Association.In fact, the improvement from the first quarter was largely driven by a decrease in the delinquency rate for loans 90-or more days past due, particularly in the states of Louisiana and Mississippi, which were heavily affected by Hurricane Katrina last year. Meanwhile, the percentage of loans in foreclosure increased by 1 bp to 0.99% as of June 30. The percentage of loans entering the foreclosure process also rose slightly from that of the first quarter. Doug Duncan, the MBA's chief economist, said the data reflect a cooling housing market, noting that some states experienced home price declines in the second quarter. "We are seeing increases in delinquency rates for subprime loans, particularly for subprime ARMS," he said.

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