While the percentage of loans in foreclosure dropped sharply in the second quarter, the share of loans that were delinquent edged up slightly, according to the Mortgage Bankers Association.The percentage of loans in the foreclosure process fell 8 basis points from the first-quarter level to 1.00%, according to the MBA's quarterly delinquency survey. The foreclosure rate was also down 22 bps from that of one year earlier. Meanwhile, the overall delinquency rate -- the percentage of loans 30 or more days past due -- was 4.34% in the second quarter, up 3 bps from the first-quarter level. However, the overall delinquency rate remained 22 bps lower than it had been in the second quarter of 2004. Doug Duncan, the MBA's chief economist, noted that nearly 96% of mortgage customers were making their payments on time. But he added that the MBA expects "an uptick in delinquency rates over the next few quarters" in states affected by Hurricane Katrina. Higher energy costs may also exacerbate delinquency rates starting in the fourth quarter.

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