The delinquency rate among loans from state housing finance agencies reached 7.5% at the end of 2010, up a full percentage point from the previous quarter and the highest rate on record, according to Standard & Poor's. While analysts do not expect the rising delinquencies to cause negative rating actions, they warned deteriorating loan performance could continue "for several years." The delinquency rate on the 34 HFA whole-loan bond programs exceeded those of comparable state loans for the second quarter in a row. It's also the third consecutive quarter more than 20 HFA programs had delinquencies increase. "One of the reasons why these delinquencies have been so high is that HFA programs include a large share of loans that were originated during the housing boom. Those loans are currently the poorest performers," S&P analysts said. Recent loans written under the new issue bond program hold more conservative underwriting standards, lower purchase prices and lower loan-to-value ratios. But another reason for the extended delinquency rate could be lenient loss-mitigation practices. A housing finance agency can give a borrower who is two months behind on a mortgage extra time to make up the deficit, allowing a seriously delinquent loan to stay on the books for more than one year instead of putting the loan in foreclosure. Unemployment rates remain high, and home prices continue to bounce along the bottom. This combination keeps struggling borrowers underwater and unable to catch up. S&P Chief Economist David Wyss expects prices on the S&P/Case-Shiller index to drop another 4% before stabilizing in the second quarter. He also expects the Federal Housing Finance Agency index to drop another 5% before hitting a bottom at the end of 2011. Unemployment meanwhile should remain above 8% for the rest of the year. Preliminary data for the first quarter show delinquencies on the decline from the end of last year but still above levels seen in the first quarter of 2010. "We believe that delinquency rates will remain high in large part because unemployment is stagnant at nearly 9% nationally," analysts said. "Until the job market improves, we believe that loans will continue to perform worse than their historical record. Based on Standard & Poor's economic outlook, high delinquency could affect HFAs for a few more years." Write to Jon Prior. Follow him on Twitter @JonAPrior.