Mortgage delinquencies fall. Will foreclosures follow?

The subprime loan 60-day delinquency rate saw its first decline since 2006 in March. The rate fell from 46.9% to 46.3%. Not exactly an earth shattering decline, but nevertheless noteworthy. (Before starting a steady rise in 2006, the delinquency rate was 6.2%.) This follows a "seasonally adjusted" quarterly decline for all types of mortgages in February according to the Mortgage Bankers Association.

While some rates of delinquency are still showing an increase, this could represent a turning point for future foreclosures. If the delinquency rate has finally peaked, what might this mean for the market at large?

• The foreclosure rate has been projected to peak anywhere from the end of 2010 to early 2012. If delinquencies continue to fall, then foreclosures may peak towards the earlier part of that range.
  
• RealtyTrac reported the slowest rate of increase in 4 years for foreclosures in their April newsletter. However, the number of foreclosures is projected to be near 1.6 million homes in 2010 and again in 2011 before starting to drop off in 2012.
  
• Distress sales are expected to remain more than 30% of the market through 2011, putting continued pressure on home prices (estimates of a 5% decline over the next year or two is anticipated in some of the hardest hit areas).
  

New mortgage modification programs are being implemented every few weeks to try and reduce the number of overall foreclosures, but the impact so far has been limited and some say only delays the inevitable. The rate of recovery in the jobs market will also play a significant role in how quickly delinquency rates, and foreclosures, fall. Those caveats aside, we may now begin to see the worst of the market correction is behind us - but with a long slog ahead before a return to "normal" conditions.