A key measure of mortgage delinquencies fell unexpectedly at the end of last year, both nationally and in Minnesota according to the Mortgage Bankers Association.
The change could signal the beginning of the end of the foreclosure crisis, but there's still a lot of trouble in the pipeline.
Delinquency refers to loans with at least one late payment, but excludes loans in foreclosure. Local housing experts have worried that ongoing high delinquency rates signal more foreclosures down the road.
Jay Brinkman, the chief economist for the Mortgage Bankers Association, saw an unexpected drop in new delinquencies between the third and fourth quarters of 2009. Those are loans between 30 and 59 days overdue, known as 30-day delinquencies.
"In a sense the good news here is that there are solid indications that the problem may now be starting to grow smaller because we have fewer new problems coming into the system," Brinkman said.
Brinkman had expected a spike in 30-day delinquencies in the final three months of the year because heating bills and Christmas expenditures usually pinch homeowners' ability to pay the mortgage.
Instead, national 30-day delinquencies fell by 0.2 percent to 3.6 percent between the third and fourth quarters of 2009.
Brinkman says only three times before in the history of the MBA survey has the non-seasonally adjusted 30-day delinquency rate dropped between the third and fourth quarters by that magnitude. In Minnesota, the 30-day delinquency rate fell 7 basis points over the same period, to 2.60.
Brinkman says delinquencies are paralleling changes in the employment picture. The drop in 30-day delinquencies follows improvements in first-time claims for jobless benefits. Similarly, he says long-term unemployment corresponds to high rates in the 90-day delinquent category.
"People who have been unemployed for six months or more now constitute over 40 percent of the total unemployed, the highest share in the history of the unemployment survey. Until the issue of this large segment of long-term unemployed is resolved, many of the longer-term mortgage delinquencies will remain a problem with a strong likelihood of turning into foreclosure," Brinkman said.