Mortgage delinquencies decline as U.S. job market

The share of U.S. mortgages at least one month late declined in the fourth quarter to the lowest level since 2008 as a better job market helped borrowers pay their bills on time.

The delinquency rate for all home loans dropped to 7.58 percent from 7.99 percent in the previous three months, according to a report today from the Mortgage Bankers Association. The rate peaked at 10.1 percent in the first quarter of 2010. It was 6.99 percent in the third quarter of 2008.

The unemployment rate fell for a fifth straight month in January to a three-year low of 8.3 percent. The improving economy is also bolstering housing demand. Sales of previously owned homes rose 5 percent in December from the previous month to the highest level since January 2011, according to the National Association of Realtors.

“The improvements are tied to the improvement in the economy,” Jay Brinkmann, chief economist of the Washington- based trade group, said in an interview. “I think that that the mortgage delinquencies are improving even faster than the overall economy. At least by some measures, the total delinquencies are halfway back to normal.”

The pre-recession average delinquency rate is about 5 percent, Brinkmann said.

The pace of new foreclosures also slowed in the fourth quarter, according to the bankers group. Foreclosure starts fell to 0.99 percent of all loans from 1.08 percent a year earlier.

Loans in foreclosure declined 26 basis points from the fourth quarter of 2010, to 4.38 percent of all mortgages. Those more than 90 days overdue -- the point at which lenders usually begin the process of seizing a property -– dropped to 3.11 percent from 3.65 percent a year earlier.

Banks cut back on foreclosures more than a year ago after state and federal regulators began investigating abusive mortgage practices. A $25 million settlement with the top mortgage lenders over the use of faulty paperwork in foreclosures was announced last week.