Rates experience little movementINTEREST RATE ACTIVITY

Mortgages still show slight dip for fourth week; report indicates delinquencies rose

During a week in which the bad news about mortgages seemed never-ending, rates didn't move much.

The benchmark 30-year fixed-rate mortgage fell 3 basis points, to 6.16 percent, according to the Bankrate.com national survey of large lenders.

A basis point is one-hundredth of 1 percentage point.

The mortgages in this week's survey had an average total of 0.29 discount and origination points.

One year ago, the mortgage index was 6.43 percent; four weeks ago, it was 6.32 percent.

The benchmark 15-year fixed-rate mortgage fell 2 basis points, to 5.93 percent. The benchmark 5/1 adjustable-rate mortgage was unchanged, at 6.04 percent.

The lowlight of the past week -- the event that tipped the stock market over the edge Wednesday afternoon -- was the release of the report on mortgage delinquencies in the final three months of 2006.

According to the Mortgage Bankers Association, 54 in every 10,000 homeowners had foreclosure proceedings started against them in the fourth quarter.

That's a record pace, narrowly exceeding the previous high of 50 in every 10,000 homeowners, set in the second quarter of 2002.

Another ominous number: One in seven homeowners who have subprime ARMs were at least 30 days late on their house payments at the end of the year.

About nine in 10 subprime mortgages are adjustables, according to a Credit Suisse report that was issued this week.

Overall, when you count all homeowners -- not just subprime -- the delinquency rate was 5 percent.

That was up from 4.7 percent from the same period a year earlier and also from the third quarter of 2006.

Among the other discouraging news was word that one of the biggest subprime lenders, New Century, is under criminal investigation into accounting problems, and that two other Top 15 subprime lenders -- Accredited Home Lenders and H&R Block's Option One -- were taking financial hits because they had misread the riskiness of the subprime loans that they recently issued.

It was smoother sailing in the market for prime mortgages, which is what the Bankrate national survey measures.

Industry insiders take that as an indication that the mortgage business is fundamentally sound, with problems limited to subprime, which accounted for one-fifth of mortgage dollars borrowed last year.

An overreaction by Congress or regulators would curtail mortgage options to consumers, says Doug Duncan, chief economist for the Mortgage Bankers Association.

"Even in the subprime arena, the preponderance of those customers graduate into the prime marketplace and improve themselves up the credit risk curve."

Around the same time Duncan was uttering those words, Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said: "The federal government has a dual obligation both to protect consumers from abusive lending practices going forward and to work to ensure that Americans who have been victimized by abusive products and practices are able to keep their homes and with them, their piece of the American dream. I am considering a number of options, including legislation, to accomplish both of these objectives."

Bloggers immediately jumped on that statement, pointing out that if the federal government bails out homeowners who are having trouble paying their mortgages, it's the same as the government bailing out the lenders who underwrote risky loans.

A bailout could encourage lenders in the future to take unnecessary risks, confident that they would get a handout from the federal government if things went wrong.

In the 2006 election cycle, Dodd collected $5.7 million in political contributions, and $2.5 million of that came from the financial services, insurance and real estate industries. Seventeen of his top 20 contributors are financial services companies.