National Home Loan Delinquencies Experience Largest Quarterly Decline Since Fourth Quarter of 2006
November 22 2010
CHICAGO – TransUnion’s quarterly analysis of trends in the mortgage industry found that the national mortgage loan delinquency rate (the ratio of borrowers 60 or more days past due) decreased again in the third quarter of 2010 to 6.44 percent, marking the largest quarterly decline since the fourth quarter of 2006. This period’s quarter over quarter decrease in the mortgage delinquency rate is twice the drop observed in either of the previous two quarters of 2010 on a percentage basis.
This statistic, which is traditionally seen as a precursor to foreclosure, reflects a decrease of 3.45 percent from the previous quarter’s 6.67 percent national average. Year over year, mortgage borrower delinquency is still up approximately 3.04 percent (from 6.25 percent in the third quarter 2009).
Q3 2010 Mortgage Delinquency Statistics
Mortgage borrower delinquency rates in the third quarter of 2010 continued to be highest in Nevada (15.12 percent) and Florida (14.63 percent), while the lowest mortgage delinquency rates continued to be found in North Dakota (1.52 percent), South Dakota (2.24 percent) and Nebraska (2.61 percent).
Ten states showed increases in delinquency from the previous quarter, with Maine (+4.71 percent), Kansas (+3.19 percent) and West Virginia (+3.12 percent) leading the pack.
Measures of later-stage mortgage delinquency, such as the ratio of borrowers 90 or 120 or more days past due, provide further positive news, as both showed larger decreases than in any quarter this year.
The average national mortgage debt per borrower again decreased (0.58 percent) to $190,176 from the previous quarter’s $191,284. On a year-over-year basis, the third quarter 2010 average represents a 1.52 percent decrease over the third quarter 2009 average mortgage debt per borrower level of $193,121.
The area with the highest average mortgage debt per borrower continued to be the District of Columbia at $368,255, followed by California at $342,695 and Hawaii at $309,536. The lowest average mortgage debt per borrower remained in West Virginia at $100,263.
Quarter over quarter, West Virginia showed the greatest percentage increase in mortgage debt (+1.06 percent), followed by Wyoming (+0.80 percent) and Rhode Island (+0.78 percent). Areas showing the largest percentage drop in average mortgage debt were New Mexico (-1.84 percent), Mississippi (-1.51 percent) and Florida (-1.44 percent).
On a year-over-year basis at a national level, mortgage originations dropped 23 percent. The drop was across all states, with the smallest decline in year-over-year originations seen in Utah (-6.43 percent) and Ohio (-8.93 percent). District of Columbia and Idaho experienced the steepest year-over-year declines (-40.7 percent and -39.5 percent, respectively).
Just as mortgage delinquency trends differ between the national and state economies, metropolitan areas also showed different movements in the third quarter of this year. Fifty-eight percent of the metropolitan statistical areas (MSAs) showed a decrease in their 60-day mortgage delinquency rates since last quarter, as compared to a 65 percent for the 90 and 120-day mortgage delinquency rates.
—“The mortgage and real estate industry is a dynamic one. Many variables — both positive and negative — are coming into play now that before would not have dramatically impacted the industry. The amount of foreclosures that many banks are holding on their books and a new round of ARM resets in the coming months are just two examples. Couple those variables with a stubborn unemployment rate, and one can see how a positive three quarter trend might quickly abate,” said FJ Guarrera, vice president in TransUnion’s financial services business unit. “However, this decline in mortgage delinquency rates, in tandem with a stabilization in housing prices in many areas of the country and record low interest rates for mortgage loans, are all positive signs that this industry is moving in the right direction, coming out of one of the worst recessions in recent memory. In addition, TransUnion is seeing positive movement and some traction in the industry in terms of real estate inquiries.”
This positive movement and traction in consumer-initiated, real estate inquiries is captured in TransUnion’s 90-day Real Estate Inquiry Index. As of the third quarter, the Real Estate Inquiry Index for the nation stood at 72.86 — up 443 basis points or 6.5 percent when compared to the second quarter (68.43). On a year-over-year basis, the Index is down 868 basis points or 10.6 percent when compared to the third quarter of 2009.
The Real Estate Inquiry Index compares the number of credit reports requested of TransUnion for a real estate transaction during a specific quarter. It is then benchmarked against the average number of inquiries during each quarter in 2000. The year 2000 is used as a benchmark because it is a meaningful launching point prior to an economic downturn, with increasing unemployment and delinquencies trends soon following. By averaging quarterly values during the base year, the impact of seasonality and demographic changes over time are diminished.
A value greater or less than 100 indicates either positive or negative activity for that particular quarter compared to the benchmark year, respectively. By comparing index values for a specific geography or market segment over time, especially for more recent years (2006 through 2010), one can gauge the relative level of consumer activity for seeking real estate related loans.
3Q10 TransUnion Real Estate Inquiry Index Statistics
Although real estate credit activity is depressed across the country two states South Dakota (154.28) and North Dakota (102.77) — have a Real Estate Inquiry Index of more than 100. South Dakota’s relatively high real estate index is predominately associated with population growth and house price stability, while North Dakota’s relatively high index is related to stable housing prices and low mortgage delinquency rates.
When comparing year to year changes, South Dakota, North Dakota and Massachusetts experienced increases in this index of 50 percent or more.
States with the lowest Real Estate Inquiry Index include Alabama (12.78), Nevada (14.47) and Colorado (14.71). These relatively low real estate indices are predominately attributed to low housing prices.
When comparing year to year changes in the Real Estate Inquiry Index Alabama, Wyoming and South Carolina experienced declines in this index of 40 percent or more.
Mortgage Delinquency Forecast
With regard to regional forecasts, Florida is anticipated to retain the highest mortgage delinquency rate by the end of 2010, reaching as high as 14.5 percent. North Dakota is still expected to continue to exhibit the lowest mortgage delinquency by year-end with a rate of 1.4 percent.
“TransUnion sees no reversal in the current three quarter trend. We believe that the 60-day mortgage delinquency rate will likely continue to drift downward for the remainder of the year, possibly nearing 6.2 percent nationally. Note that this forecast is based on various economic assumptions, including that both real estate values and the employment picture improve gradually. We are noting small improvement in both areas — monthly job growth numbers and doubling of areas in the U.S. experiencing rising home values. This forecast would certainly change if there are unanticipated shocks to the economy affecting the recovery in the housing market,” said Guarrera.
TransUnion’s Trend Data database
The report is part of an ongoing series of quarterly consumer lending sector analyses focusing on credit card, auto loan and mortgage data available on TransUnion’s Web site. Information for this analysis is culled from TransUnion’s Trend Data and the anonymous credit files of approximately 10 percent of credit-active U.S. consumers, providing a real-life perspective on how they are managing their credit health.
TransUnion’s Trend Data, a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion’s national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels. For the purpose of this analysis, the term “credit card” refers to those issued by banks.
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