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Late house payments aren't widespread -- yet

Mortgage rates are rising, home prices are stalling in parts of the country, lots of people are taking out alternative home loans that barely existed five years ago and inflation seems to be picking up.

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Guess which of the following scenarios is happening to homeowners:

A. They are falling behind in their mortgage payments. The delinquency rate -- in other words, the proportion of homeowners who are at least 30 days past due on their house payments -- is skyrocketing. Foreclosures are going up, too, but not as rapidly.

B. Homeowners actually are making fewer late payments than they were at the end of 2005. They're making more late payments than a year ago, but only because of Hurricane Katrina.

The correct answer is B, according to the Mortgage Bankers Association. The proportion of homeowners making late payments fell in the first three months of this year, compared to the last three months of 2005. The foreclosure rate dropped a teensy bit.

Welcome to Housing Market, U.S.A.
To visualize what's happening, imagine a town that represents the U.S. housing market. The town has exactly 10,000 owner-occupied homes with mortgages. In the first three months of this year, 441 of those homeowners were at least 30 days past due on their house payments, compared to 470 homeowners in the last three months of 2005. In other words, the delinquency rate fell to 4.41 percent from 4.7 percent.

In the same town, 98 homes were somewhere in the foreclosure process in the first three months of 2006, compared to 99 homes in similar straits in the final quarter of 2005. The foreclosure inventory fell to 0.98 percent from 0.99 percent.

In the unlikely event that you had been pondering delinquencies and foreclosures, you probably didn't think they were declining in number. A lot of news coverage has speculated that the combination of rising interest rates, alternative loans and falling home prices could force homeowners into foreclosure. But spikes in delinquencies and foreclosures haven't happened. Don't congratulate yourselves too much, America -- this isn't a sign that you've suddenly become more responsible.

Factors behind the drop in late payments include:

Jobs combat delinquency
"The most important thing in the performance of the housing market is employment," says Doug Duncan, chief economist for the Mortgage Bankers Association. The economy has been creating jobs in the last couple of years at a rate that "counteracts things that tend to drive delinquencies up."

Next: "If you can work, then you can pay your mortgage."
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State-by-state mortgage delinquencies
Mortgage Basics: Avoiding foreclosure
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