HFA Delinquencies Dipped 3.2% in 1Q, S&P Reports

Housing finance agency delinquencies declined in the first quarter for the first time since loan performance began to deteriorate in the second quarter of 2008, Standard & Poor's reported Wednesday.

The rating agency noted that delinquencies remain in an elevated range and suggested default rates could rise in the second quarter.

The S&P/Case-Shiller National Home Price Index reported that delinquencies fell 3.2% in the first quarter of 2010 from the fourth quarter of 2009, but the actual number of delinquencies was still higher than the same period last year.

Falling home prices are associated with higher delinquency rates, according to the report, as homeowners who are unable to sell their homes or refinancing their mortgages "decide not to continue making payments on an asset that is worth less than what is owed."

The numbers indicated that the federal home-buyer tax credit, which expired April 30, may have played a role in slowing defaults by giving hope to embattled homeowners.

"Declining mortgage applications for home purchases, slower sales following the expired tax credit, more distressed home sales as a result of foreclosure, a large backlog of distressed properties that haven't been marketed for sale yet, and a high unemployment rate may further hamper home prices," the S&P report said.

Standard & Poor's said those factors may lead to an increase in default rates on HFA loans may in the second quarter of 2010.

However, the report noted that housing usually performs well in the second and third quarters.

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