Outlook for Mortgage Credit Quality Remains Bleak

There's little hope to stem the tide of rising mortgage delinquencies and defaults in the short term, according to economists who follow the industry. Jay Brinkmann, chief economist for the MBA, said that declining home values, which limit the ability of troubled borrowers to sell a home, have increased the "roll rate" of 30-days delinquent loans in one quarter that go into foreclosure during the next quarter. In the 1990s, about 10% of 30-day past due loans moved into foreclosure. Today, about 30% of short-term delinquencies roll into foreclosure, he said during a conference call to discuss the MBA's delinquency survey. Moreover, in hard hit states, the roll rate is even higher, 75% today in California, for instance. And with unemployment rising fast, there's little hope for relief in the short term, according to Ryan Sweet, an economist at Moody's Economy.com. He told MortgageWire that he expects the unemployment rate to rise to 8.5% by early 2010. "Mortgage credit quality is going to decline well into 2009," Mr. Sweet said.