Mortgage Delinquencies Fall in 1st Quarter; First Decline Since 2006

Dennis Norman

Consistent with the report on mortgage delinquencies from LPS that I wrote about last week, today TransUnion released it’s report on mortgage delinquencies showing they fell 1.74 percent in the first quarter of this year, which is the first quarterly decline since 2006. This is good news, however, not to rain on the parade, but we do need to remember that the 4th quarter of 2009 had a record-setting mortgage delinquency rate so to have the rate for the following quarter drop simply means, if you want to do the glass half-empty thing, this quarter didn’t set another all-time record for mortgage delinquencies.TransUnion Logo

After steadily increasing for 12 consecutive quarters, it is a welcomed relief to see the rate finally decrease to 6.77 percent (for borrowers that are 60+ days past due). This rate is still 30 percent higher than it was a year ago when it was at 5.22 percent.

Fairly consistent with the LPS report from last week, the trends reflected in this report are encouraging; while the ratio of borrowers that are 90 or more days delinquent increased for the quarter, the increases were the smallest since the fourth quarter of 2007.

Other highlights from the report:

  • Nevada continues to have the highest mortgage delinquency rate at (15.98 percent)followed by Florida (14.65 percent)
  • The lowest mortgage delinquency rates continued to be found in North Dakota (1.76 percent), South Dakota (2.44 percent) and Nebraska (2.68 percent)
  • Seventeen states showed increases in delinquency from the previous quarter with Alaska (+11.3 percent), New Hampshire (+6.3 percent) and Hawaii (+4.8 percent) leading the pack.
  • The average national mortgage debt per borrower decreased (0.47 percent) to $192,774 from the previous quarter’s $193,690. On a year-over-year basis, the first quarter 2010 average represents a 1.39 percent decrease over the first quarter 2009 average mortgage debt per borrower level of $195,500.

“The fall in mortgage delinquency is indeed good news for the consumer, the mortgage industry, and the current economic recovery,” said FJ Guarrera, vice president in TransUnion’s financial services business unit. “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. With prices beginning to rise, increasing consumer confidence and positive trends in the equity markets, home owners 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.

“However, part of the first quarter demand for new homes was fueled by the First-Time Homebuyer Credit, which was extended to April 30, along with the provision allowing some current home owners to also qualify. Once this runs out, we could see some impact on mortgage demand and therefore home prices — all other things remaining equal. Finally, the dip in mortgage delinquencies is influenced in part by seasonal factors during the tax season, as many homeowners reap the benefits of real estate deductions — tax savings that can be used to keep current on existing mortgage obligations.”

Forecast

“Based on revised economic assumptions, which are now more optimistic than before, TransUnion believes that the 60-day mortgage delinquency rate will likely continue to drop in 2010, possibly to as low as 6.3 percent. Note that this forecast is dependent upon economic conditions, and may change if there are unanticipated shocks to the economy affecting the recovery in the housing market,” said Guarrera.

With regard to regional forecasts, Florida is anticipated to experience the highest mortgage delinquency rate by the end of 2010, reaching as high as 18.2 percent. North Dakota is still expected to continue to exhibit the lowest mortgage delinquency by year-end with a rate of 1.7 percent.

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