Delinquencies Fall for the First Time in 12 Quarters: TransUnion

Mon, May 10, 2010


After steadily increasing for 12 consecutive quarters, the national mortgage loan delinquency rate—the ratio of borrowers 60 or more days past due on their mortgage—dipped down to 6.77 percent in the first quarter of this year, according to data released Monday by TransUnion.

This statistic, which is traditionally seen as a precursor to foreclosure, reflects a 1.74 percent decline from the previous quarter’s 6.89 percent average. However, on a year-over-year basis, mortgage borrower delinquency was still up approximately 30 percent from 5.22 percent in the first quarter of 2009.

TransUnion said delinquency rates in the first quarter continued to be the highest in Nevada (15.98 percent) and Florida (14.65 percent). And the lowest rates of delinquency were found once again in North Dakota (1.76 percent), South Dakota (2.44 percent), and Nebraska (2.68 percent.)

The Chicago-based company also found that just 17 states showed increases in delinquency rates from the previous quarter. Alaska led the pack with an 11.3 percent increase in delinquency rates, and New Hampshire, up 6.3 percent, and Hawaii, up 4.8 percent, followed close behind.

But even the states that showed an increase in mortgage delinquency had metropolitan statistical areas (MSAs) that showed improvement over the previous quarter. For example, delinquency rates increased in both Wyoming and Alaska, but the Cheyenne, Wyoming MSA showed a decrease in delinquency of 23.48 percent, and the Fairbanks, Alaska MSA posted a decrease of 1.48 percent.

In total, 60 percent of the nation’s MSAs showed a decline in their 60-day mortgage delinquency rates from the prior quarter, a significant jump from the mere 14 percent who
reported a decrease between the third and fourth quarter of last year.

Measures of later-stage mortgage delinquency, such as the ratio of borrowers 90 or 120 or more days past due, provided additional positive news. While these measures did not decrease from the first quarter, their increases were the smallest since the recession began in the first quarter of 2007, TransUnion said. This, the company explained, shows that later-stage mortgage delinquency is leveling off, as expected.

“The fall in mortgage delinquency is indeed good news for the consumer, the mortgage industry, and the current economic recovery,” said FJ Guarrera, VP in TransUnion’s financial services business unit.

Guarrera said the February rise in the S&P/Case-Shiller home price index and the recent year-over-year increases in median existing home prices reflect the uptick in housing demand, despite the downward pressure exerted by the continual influx of foreclosures. And with prices beginning to stabilize, consumer confidence increasing, and positive trends in the equity markets, homeowners who are currently upside down on their mortgages may be less inclined to join the ranks of defaulters, which have been growing in number since the summer of 2008, he said.

However, Guarrera noted that part of the first quarter demand for new homes was fueled by the homebuyer tax credit, which expired April 30. He said the absence of this credit could impact mortgage demand and therefore home prices — all other things remaining equal. In addition, Guarrera said the dip in mortgage delinquencies was influenced in part by seasonal factors during the tax season, as many homeowners reaped the benefits of real estate deductions, resulting in tax savings that could be used to keep current on existing mortgage obligations.

Going forward, TransUnion has revised its economic assumptions to be more optimistic than before. As a result, the company believes the 60-day mortgage delinquency rate will continue to drop in 2010, possibly to as low as 6.3 percent.

With regard to regional forecasts, Florida is anticipated to experience the highest mortgage delinquency rate by the end of the year, reaching as high as 18.2 percent. And North Dakota is still expected to exhibit the lowest delinquency rate by year end with a rate of 1.7 percent, TransUnion said.


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