By Mary Ellen Podmolik | Homeowners in the Chicago area are falling delinquent on their mortgages at a faster rate than those for Illinois as a whole and for the nation, a trend that could dampen hope for a local housing recovery.

In
the Chicago area, 7.71 percent of mortgages were 60 days or more
delinquent in
the last three months of 2009, compared with a delinquency rate of 4.57
percent
in 2008’s final quarter, credit-reporting firm TransUnion said Tuesday.

The
sharp 69 percent increase kept the local delinquency rate above the rates for
the state and the nation as a whole, as has been the case for all of 2009. At
the end of last year, 6.57 percent of mortgages in Illinois and 6.89 percent of
all U.s. mortgages were 60 days past due.

TransUnion
predicts Illinois’ delinquency rate will peak at 7.16 percent later this year.
However, the delinquencies pale in comparison to trends in hard-hit states like
Nevada and Florida.

The
TransUnion report, along with a separate one from Standard & Poor’s Corp.,
suggest that the housing industry’s darkest days may lie ahead, as more
homeowners fall behind on their mortgage, effort to modify loans falter and more
homes move through the foreclosure process. The result is continued pressure on
home prices as a glut of unsold inventory grows larger.

“Delinquency
is a lagging economic indicator,” said F.J. Guarrera, a TransUnion vice
president. “We will see more delinquencies. We will see more foreclosures and
when we see more foreclosures, it could suggest that home prices could fall
some more.”

Already,
it would take the nation’s housing market 33 months to absorb the current
“shadow inventory” created by the number of homes with delinquent mortgages but
not yet foreclosed and those that are bank-owned. The estimate does not include
the potential effect of loans that are not currently in default but may become
so in the future.

Any
recent slight uptick in housing prices, S&P said, is due to a temporary
slowdown in the number of foreclosed homes to be listed for sale.

Wednesday,
the Treasury Department is scheduled to release its January performance of its
Home Affordable Modification Program.  It was in February 2009 that the
Obama administration announced plans to help troubled homeowners save their
homes through loan modifications. The program has not met expectations.

In
fact, S&P found that in June 2009, just less than 70 percent of modified
mortgages re-defaulted.