The Mortgage Bankers Association says 4.65 percent of home loans were at least 30 days past due in the last three months of 2001. That number contains bad news and good news -- and the good news isn't really so good.

The bad news is that the delinquency rate -- the percentage of house payments that are 30 or more days past due -- is near its highest level since the 1991 recession.

The good news is that the delinquency rate peaked in the three months that ended on Sept. 30, 2001, and actually declined slightly in the last three months of the year. The delinquency rate fell from 4.87 on Sept. 30 to 4.65 on Dec. 31.

A declining delinquency rate sounds like a hopeful sign until you hear the explanations for it. Then you realize that some people bit off more than they could chew when they got a mortgage, or lost their jobs without having adequate emergency savings.

Doug Duncan, chief economist for the Mortgage Bankers Association, gives three reasons for the drop in delinquencies. "The first is the effect of Sept. 11 and subsequent anthrax-related mail problems, which we believe inflated the third-quarter 2001 data slightly," he says.

Homeowners who mailed their checks a couple of weeks late might have been counted 30 days past due if their checks were delayed by grounded planes. The anthrax theory is unlikely, however, because the anthrax scare began in the fourth quarter, after the Oct. 5 death of American Media photo editor Bob Stevens.

Second, Duncan says, homeowners continue to refinance their mortgages. Rates fell to 34-year lows in early November, and people refinanced their existing mortgages like crazy. Some people refinanced for more than they currently owed and pocketed the difference, which gave them cash reserves to tide them over in bad times. And since the refinanced loans were so new, the borrowers hadn't had time to fall behind on their payments. The peak time for delinquencies is two to three years after borrowing.

"The third primary reason, and perhaps most importantly," Duncan says, "was that energy prices have gone down in the past year and weather has been mild." Utility bills dropped, so homeowners had more money in their checking accounts to keep their home loans current.

Too much mortgage?
In other words, when homeowners can pay their heating bills or their mortgages, but not both, they pay the heating bills. The bad news behind the good news is that tens of thousands of homeowners are one cold snap away from mortgage delinquency.

When homeowners make their house payments on time only because their utility bills aren't too high, it's a sign that they have too much debt or don't earn enough (maybe because of job loss or a cut in hours).

The numbers point to the importance of setting aside a rainy-day fund, borrowing within your means and keeping winter utility bills in mind when you're calculating how much you can afford to pay every month. When you buy a house, find out from the previous owner, a real estate agent or a utility how much you can expect to pay for utilities -- not just now, when fuel costs have fallen, but when fuel oil, natural gas and propane prices are higher.

The MBA's delinquency survey covers 32 million mortgages, and the 0.22 percent drop from the third quarter to the fourth quarter implies that about 70,000 of those homeowners caught up with their mortgage payments in the last three months of the year.

Duncan says he was surprised that the delinquency rate fell in the fourth quarter and that he expects it to rise again, along with the unemployment rate. The unemployment rate generally peaks after the economy has started recovering from a recession because companies wait and make sure the economic tide has turned before they start hiring again.