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US mortgage default rates, which are termed delinquency rates, hit an all-time high in the first quarter of 2007, according to data compiled by Equifax and analyzed by Moody’s Economy.com. The percentage of mortgages in default rose to 2.87%, surpassing the worst levels following the 2001 recession. The information was released to business television channel in advance of a briefing in New York on Wednesday on a forthcoming study on US mortgage credit quality. “The news is unremittingly bad,” CNBC's senior economics correspondent Steve Liesman said Tuesday. “Delinquency rates were up in 44 of the 50 states.” The only states where delinquencies didn’t increase were Kansas, Kentucky, Montana, North Dakota, South Carolina and Utah. The states with the highest delinquency rates are: Mississippi, 4.85% Liesman said delinquencies rose in first mortgages, second mortgages and home equity loans. There also were increases in loans that are 30, 60 and 90 days past due. “I don’t think we’re near the bottom,” said Mark Zandi, Chief Economist at Moody’s Economy.com who reviewed the data. “The correction is in full swing. I think we have at least a year to go.” Zandi said that delinquencies will continue to increase because many sub-prime and Alt-A loans written in 2005 and 2006 will be reset to a higher rate for the first time this year or 2008. “I think credit conditions are going to weaken measurably more,” Zandi said. “The good news, economy-wide, is that the job market is strong. As long as the job market hangs tough, I think we’ll be okay outside of housing.” The metro areas with the highest mortgage delinquency rates are: Zandi said people living in these metro areas tend to have low, volatile incomes, making it difficult to manage debt. Earlier Tuesday, the New York Times reported that some of the problems afflicting mortgages sold to borrowers with weak, or subprime credit increasingly appear to be cropping up in loans made to homeowners who were thought to be less risky. The latest sign of possible further deterioration in the credit market came yesterday as American Home Mortgage, a lender based in Melville, N.Y., said that it would earn less and pay out a smaller dividend because it was being asked to buy back and write down the value of certain loans. Those loans are known as Alternative A, or Alt-A, and were made to borrowers with decent credit. Zandi told the New York Times that the true test will come in the next two to three months during the peak of the spring home selling season. He notes that employment in the construction sector, which had grown at a rapid pace during the housing boom, has levelled off in recent months but has not fallen significantly even as construction spending has tumbled. CNBC VIDEO Reports Tuesday, on US Housing Market: Separately Tuesday, a panel of US economists are reported to have cut their forecast for US economic growth this year, citing a lower outlook for capital spending, residential investment and business inventories.The Blue Chip Economic Indicators panel of forecasters said they expect US gross domestic product to expand at a rate of 2.3% in 2007, the slowest growth since 2002. In March, the panel had forecast growth at a rate of 2.5%. The panel also pared back its expectations of how much inflation will slow, although inflation is expected to grow less rapidly in 2007 than any of the prior three years.. Also of concern to the forecasters were signals that growth in the service sector was slowing. The year-over-year consensus forecast of real GDP growth in 2008 dropped 0.1% point in April to 2.9%, the first change in four months. The panel forecast the unemployment rate this year at 4.7% and for 2008 at 4.8%, unchanged for a third straight month.
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