The third-quarter 2003 National Delinquency Survey released by the Mortgage Bankers Association shows that the seasonally adjusted third-quarter delinquency rate for mortgage loans on one-to-four-unit residential properties was 4.28 percent in third-quarter 2003, down 34 basis points from 4.62 percent in second-quarter 2003 and registering the highest percentage-point reduction in the total delinquency rate since the first quarter of 1990.

"With the expectation of continued strong economic growth through the next several quarters, job growth should continue and accelerate. This, in turn, is likely to give support to the downward trend in the delinquency rate, taking foreclosures lower as well," said Doug Duncan, Mortgage Bankers Association senior vice president and chief economist. "While economic growth will lower delinquency rates, most loans have now been on the books less than three years, so some increase in delinquency might be expected as they age."

The third-quarter drop in overall seasonally adjusted delinquencies was driven by a decrease in all delinquency categories, especially those in the category of 30 to 59 days. On a seasonally adjusted basis, the percentage of loans past due 30 to 59 days decreased 23 basis points, while the percentage of loans 60 to 89 days past due decreased seven basis points and the percentage of loans 90 days or more past due decreased four basis points.

During the third quarter, the SA delinquency rates fell for all loan types: 21 basis points for conventional loans (3.14 percent to 2.93 percent), 46 basis points for FHA loans (12.59 percent to 12.13 percent), and 50 basis points for VA loans (8.24 percent to 7.74 percent). Since third-quarter 2002, the SA delinquency rate has decreased 11 basis points for conventional loans and seven basis points for VA loans, while it has increased 51 basis points for FHA loans.

Similar to the overall drop in the conventional loan delinquency rate, prime conventional loans registered a seasonally adjusted delinquency rate that was down 15 basis points from the second quarter and down nine basis points from third-quarter 2002.

The Mortgage Bankers Association's delinquency rate does not include loans that are in the process of foreclosure. While seasonally adjusted delinquency rates dropped dramatically during third-quarter 2003, the percentage of all loans in the foreclosure process remained flat and the percentage of new foreclosures in the quarter increased. The foreclosure inventory percentage at the end of the third quarter was 1.12 percent, unchanged from last quarter but three basis points lower than the third-quarter 2002 rate of 1.15 percent.

While the overall foreclosure inventory percentage proved stable, the percentage of loans in foreclosure varied by loan type. Compared with third-quarter 2002, the percentage of loans in foreclosure has decreased three basis points for conventional loans, increased 34 basis points for FHA loans and increased five basis points for VA loans.

The statistics for mortgage loan delinquency provide another means to measure the status of economic recovery and the steadfast nature of the housing market.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to jnewton@jnpr.com.