The national mortgage delinquency rate (the rate of borrowers 60 or more days past due) declined for the fourth consecutive quarter, dropping to 5.19% in Q4 2012 from 5.41% in Q3 2012 and 6.01% in Q4 2011, according to an analysis by TransUnion.
Delinquency rates are still well above the "normal" range of 1.5% to 2%, despite experiencing the largest yearly decline since the end of the recession. TransUnion officials view this as a continued sign of the sluggish national housing market recovery - although some states are performing well, with all but three states seeing an improvement in mortgage delinquency rates.
While delinquency rates fell, the average mortgage debt rose slightly in Q4 2012 to $186,785. Although this represents a slight increase from Q3 2012, when the average debt was $186,445, it is still a decline year-over-year.
“For the most part, newer vintage mortgage loans are not the reason for the stubbornly high delinquency rate. They are performing relatively well,” said Tim Martin, group vice president of U.S. Housing in TransUnion’s financial services business unit. "The elevated delinquency levels that we still are experiencing are a result of older vintage loans - borrowers who haven’t been making their payments for a rather long time that are still in the system, inflating the overall rate.”
At the height of the mortgage crisis, delinquencies rose 54% in 2007, 53% in 2008 and 50% in 2009. The subsequent decline has been a slow process with delinquency levels dropping 7% in 2010, 6% in 2011 and now falling 14% in 2012.
At a more granular level, 81.4% of Metropolitan Statistical Areas (MSAs) experienced a yearly decline in their mortgage delinquency rate. Notable MSAs experiencing declines included Los Angeles (-33.6%), Memphis (-32.2%), Philadelphia (-28.3%), Detroit (-27.2%) and Baltimore (-26.0%).
TransUnion expects the mortgage delinquency rate to continue its downward trend in the first quarter of 2013, though it will likely remain above 5%.
“The declines in the mortgage delinquency rate will likely be muted for the foreseeable future as the foreclosure process in some states can take more than 1,000 days,” said Martin. “It’s not clear yet, but recently announced regulatory rules related to mortgage servicing may tend to slow down this process further. What is clear from the data TransUnion collects, is that, until the old vintages work through the system, we expect the delinquency rate to remain elevated.”
This mortgage delinquency rate data is reported by TransUnion as part of its ongoing series of quarterly analyses of credit-active U.S. consumers and how they are managing credit related to mortgages, credit cards and auto loans.
The forecast is based on economic assumptions such as gross state product, consumer sentiment, unemployment rates, real personal income and real estate values.