Mortgage defaults, delinquencies at record -survey

NEW YORK, April 11 (Reuters) - Mortgage late payments and defaults reached record levels in the first quarter and may threaten the modest U.S. economic expansion seen this year, Moody's Economy.com said in a survey released on Wednesday.

"Delinquency and default rates jumped to new highs in the quarter, and all indications are that they will continue to rise measurably into 2008," the survey said.

"The erosion in mortgage quality is currently the most serious threat to the economic expansion," the survey added.

Using data taken from a "very large" random sample of credit files during the last week of March, the survey found delinquency rates on all mortgage debt outstanding rose to 2.87 percent, up from 2.51 percent the previous quarter.

The first-quarter rate outpaced the previous record delinquency rate in the fourth quarter of 2001 as the U.S. economy struggled to return to normalcy following the Sept. 11 attacks.

Credit problems exist all over the country, the report said, with the largest increases in California, Florida, Nevada and much of the Northeast.

Beyond that, 30-day, 60-day, 90-day and 120-day delinquency rates all rose strongly.

At an annualized pace, first-quarter defaults reached 1.16 million, far outpacing the 900,000 defaults last year.

"Defaults don't necessarily end up in a foreclosure sale, but most seem headed that way as lenders appear to be taking a tough stance with delinquent borrowers," the survey said.

Credit problems will likely worsen into 2008 when payments on the many aggressive loans sold in recent years reset at higher interest rates in coming quarters, compounding other problems such as falling house prices, tighter mortgage underwriting standards and a less buoyant job market, the report said.