Late Mortgage Payments Increase

Delinquencies on U.S. home mortgages rose in the third quarter because of the displacement of people by Hurricane Katrina, but they fell from a year earlier as the economy improved, an industry group said Wednesday.

The rate of homes entering the foreclosure process, slightly up last quarter from a year earlier, is likely to grow once the effects of hurricanes Katrina, Rita and Wilma are reflected, the Mortgage Bankers Assn. said.

Many lenders are delaying pushing delinquent loans into foreclosure as a means of hurricane relief. Katrina, the costliest U.S. natural disaster, was quickly followed by Rita and Wilma, MBA noted in its report.

The mortgage delinquency rate rose to 4.44% in the third quarter from 4.34% in the second quarter, but fell from 4.54% in the third quarter last year, the MBA said.

New foreclosures on homes edged up to 0.41% in the third quarter from 0.40% a year earlier. The hurricanes’ effect will probably boost delinquencies and foreclosures for at least the next few quarters, according to the MBA.

These figures are seasonally adjusted for one- to four-unit residential properties.

Delinquent loans rose sharply in Louisiana and Mississippi during the quarter because of destruction from the storms, which slammed the Gulf Coast in August and September.

Delinquencies for all loan types, however, were lower in the third quarter once hurricane effects were eliminated.

Hurricane fallout, higher energy costs as well as rising interest rates and their effect on adjustable-rate mortgages could further squeeze homeowners in coming months, MBA Chief Economist Doug Duncan said in a conference call.

But the improving economy is creating more jobs, which will help temper rising delinquencies and foreclosures, he said.

“At the end of the day, the most important criteria are job growth and real income growth,” Duncan said.