TransUnion sees Further Declines in Mortgage Delinquency Rate

by devteam December 13th, 2012 | Share

TransUnion, one of the nation’srnmajor credit reporting bureaus forecasted today that one of the   primaryrnconsumer credit variables — mortgage delinquency rates – will continue torndecline through 2013 while the other – credit card delinquencies will increasernslightly.  </p

The ratio of borrowers 60 or morerndays past due on their mortgages is projected to decline to 5.06 percent by thernend of 2013 from an estimated 5.32 percent at the conclusion ofrn2012. TransUnion forecasts mortgage delinquencies, a statistic generallyrnconsidered to be a precursor to foreclosure, will decline in 34 states and thernDistrict of Columbia with only 13 states experiencing increases. </p

Mortgage delinquencies peaked in thernfourth quarter of 2009 at 6.89 percent. rnThis marked the 12th consecutive quarter that rates rose,rnstarting at 1.94 percent in the fourth quarter of 2006.  This was an unprecedented 255 percentrnincrease in three years.  The return tornnormal levels has been much less dramatic and nearly three years after that peakrndelinquency rates have only dropped 21 percent to 5.41 (Q3, 2012) and, if thernTransUnion forecast holds, will only have dropped about 27 percent by the endrnof 2013 and would still be well above the “normal” range of 1 1/2 torn2 percent.  </p

“The slow improvement pace wernare experiencing right now seems to be less about new borrowers not being ablernto make their payments and more about existing borrowers who have beenrndelinquent for a very long time,” according to Tim Martin, TransUnionsrngroup vice president of U.S. Housing. “For example, our analysisrnshows the delinquency rate would fall to around 2.5 percent, or pretty muchrnnormal, if we simply took borrowers who haven’t made a mortgage payment in overrna year out of the calculation. By comparison, pre-recession, it wasrnunusual for a borrower to go more than 6 months without either being able torncure their situation or go through the foreclosure process.</p

“While we are encouraged by therndirection of the forecast,” Martin said, “we would have hoped for a projectionrnthat called for a more substantive drop in delinquencies. If the pace ofrnimprovement does not pick up, it will take a very long time to get back torn’normal’ delinquency rates.”</p

The ratio of credit card holders 90rnor more days delinquent on one or more cards is expected to remain relativelyrnlow throughout 2013, increasing slightly from 0.83 percent in the fourthrnquarter of 2012 to 0.87 a year later.  Betweenrn2000 and 2011, the credit card delinquency rate has averaged 1.24 percentrnduring the fourth quarter. In the 51 quarters since Q1 2000, the rate hasrnonly been below the 0.90% threshold 10 times. </p

Credit card debt per borrower, whichrnhas been relatively low since 2010, is expected to rise in the next year fromrnits Quarter 3 level of $4,996 to $5,050 in Q4 2012 and $5,446 at the end ofrn2013. This would be the highest credit card debt level sincern2009. Average credit card debt per borrower peaked at $5,776 in Q1rn2009. 

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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