Reports show declines in mortgage defaults

Is the tide of home-loan defaults finally beginning to recede?

There were signs of that on Monday in two reports examining trends in serious delinquencies -- home loans on which borrowers are at least 60 days behind on payments.

A report from the credit data firm TransUnion said such delinquencies fell slightly across the nation in the first quarter of 2010 -- the first such decline in three years. The rate was 6.77% of all home loans, down from 6.89% in the fourth quarter of last year.

A separate report from the Fitch Inc. ratings firm said serious delinquencies on subprime loans backing mortgage bonds fell for the second month in a row, thanks to more loan modifications and also to borrowers who caught up on payments on their own. The rate was still sky high -- 45.2% of all subprime loans, down from 46.3% in March.

Mark Zandi, chief economist of Moody's Analytics, said in an interview that many of the worst loans have been cleared out and that mortgages written over the last three years -- with far higher standards and at far lower home prices -- are holding up better.

With the economy now adding jobs, the peak in borrowers missing one or two payments has passed, Zandi said, although the percentage of loans that are 90 or 120 days late may still rise a bit.

"And there's still a boatload of loans in the foreclosure process," he noted.

Because of the latter, Zandi predicted that home prices nationally may still fall somewhat lower. In Southern California and the San Francisco area, prices probably have bottomed, he said, because the wave of foreclosures hit so hard and early and because investors, accustomed to volatile prices in those areas, have stepped in to purchase houses.

Fitch managing director Vincent Barberio said it's possible that the drop in delinquencies is only a temporary trend caused by troubled borrowers receiving tax refunds.

"The next few months will be a better indicator of whether we?re witnessing the beginnings of a legitimate turnaround," Barberio said in a statement.

Fitch said delinquencies fell for the first time in four years on alt-A loans. These mortgages were made to people with decent credit histories who weren't considered the highest quality, or prime, borrowers because of such factors as lack of full income documentation.

Delinquencies on alt-A loans in bundles backing securities decreased to 34.1% in April from 34.4% in March, the first monthly decline since April 2006. More than half of these loans were made in California and Florida. While alt-A delinquencies remained unchanged in Florida at 51.7%, delinquencies in California fell to 35.8% from 36.3% the prior month.

--E. Scott Reckard