Rising Delinquencies Signal More Foreclosures

New York, NY, Dec. 30, 2009--Mortgage delinquencies are still on the rise, which could put a damper on a rebounding housing market.

Although investors appeared to take a report on flat U.S. home prices in stride Tuesday, rising mortgage delinquencies signal more foreclosures are ahead.

"Delinquencies are a precursor to foreclosures," said Cameron Findlay, chief economist at LendingTree.com.

"We're not seeing any decreases in delinquencies, which is very concerning."

More strapped borrowers are falling behind on their monthly payments during the recession as unemployment hovers around 10%.

Late Monday, Fannie Mae said serious delinquency rates in its conventional single-family-home mortgage portfolio rose to 4.98% in October from 4.72% the previous month. A year ago, the rate stood at 1.89%.

Home values have rebounded somewhat in recent months, with some economists attributing the bounce to the expiration of the $8,000 tax credit for new homebuyers. The credit has been expanded and extended to spring.

Recent evidence suggests housing is rebounding, but many mortgage holders who face financial problems because of the recession have a tough climb to modify their loans and keep their homes out of foreclosure.

"The industry's recovery remains precarious, however, given the sizable number of potential foreclosed homes that might eventually come to market, as well as the anticipated continued decline in home prices in 2010," Moody's Investors Service said.