Real Estate Market

Mortgage delinquency rate falls for first time in two quarters

by Broderick Perkins

(5/10/2012) ERATE Exclusive - More good news on the housing front: the national mortgage delinquency rate declined for the first three months of 2012, coming in at 5.78 percent. It was 6 percent in the fourth quarter last year.

The improved delinquency status ends 2 quarters of increases that began in the third quarter last year, according to Transunion.

The rate was also down from the 6.19 percent level a year ago.

The delinquency rate is the percentage of borrowers 60 or more days past due.

Transunion reports the mortgage data along with it series of quarterly analyses of credit-active U.S. consumers and how they are manage mortgage, credit card and auto loan credit.

Before the third quarter 2011, 60-day mortgage delinquency rates had dropped for six consecutive quarters. This latest quarter brings the delinquency rate to its lowest point since the first quarter of 2009. Improved employment conditions and more borrowers able to refinance and take advantage of federal programs gets some of the credit.

Transunion said home prices continue to fall and unemployment remains relatively high, but consumer confidence is beginning to show some improvement. "To see that quarter over quarter, and year over year, more homeowners were able to make their mortgage payments is certainly welcome news," said Tim Martin, group vice president of U.S. Housing in TransUnion's financial services business unit.

"Before this, we saw two quarters of delinquency increases and while we are still about three-times above the pre-recession norm, this should mark the start of consistent improvement each quarter," said Martin.

TransUnion forecasts mortgage delinquency rates will continue to drift downward in 2012 as more homeowners are able to repay their mortgage debt obligations.

That's in line with a host of housing forecasts indicating recovery is under way in many metros and due for the entire nation by year's end.

Transunion said between fourth quarter 2011 and first quarter of 2012, all but eight states experienced decreases in their mortgage delinquency rates. Nearly three in four, 73 percent of metropolitan areas saw improvement in mortgage delinquency rates in the first three months this year.

That number is strikingly up from the prior two quarters when only 36 percent of the MSAs experienced improvements in the delinquency rate.

A TransUnion Mortgage Trend Data Infographic reveals the highest delinquency rates in Florida (13.87 percent); Nevada (11.16 percent); New Jersey (8.31 percent) and Maryland (7.11 percent.)

At the low end, North Dakota came in at 1.51 percent; South Dakota, 2.11 percent; Nebraska, 2.31 percent and Wyoming 2.43 percent.

The most reduced levels of delinquencies came from Arizona, Wyoming and California. The most increased levels were found in Vermont, New Jersey and Arkansas.

"We have seen increased traction of refinance activity related to HARP 2.0, a program that makes it easier for homeowners with negative equity in their home to refinance," said Martin.

"Going forward, as these homeowners take advantage of the historic low mortgage interest rates, and perhaps lower their monthly payment in the process, it may have some positive impact on the overall delinquency rate starting later this year."

TransUnion's forecast is based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income, and real estate values. The forecast would change if there are unanticipated shocks to the economy affecting recovery in the housing market or if home prices fall more than expected.

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