Mortgage Delinquencies Edge Up During Fourth Quarter
But as the economy improves, delinquency rates should drift down.
The national mortgage delinquency rate (the rate of borrowers 60 or more days past due) increased for only the second time since the end of 2009, edging upward to 6.01% at year-end 2011, according to TransUnion.
Between the third and fourth quarters of 2011, all but 13 states experienced increases in their mortgage delinquency rates.
During this period, 64% of metropolitan areas saw increases in their mortgage delinquency rates during fourth-quarter 2011, the same percentage as in the third quarter but up from 21% during second-quarter 2011.
“To see that, quarter over quarter, fewer homeowners were able to make their mortgage payments is not welcome news,” says Tim Martin, group vice president of U.S. Housing in TransUnion's financial services business unit.
But he says the news wasn’t unexpected for three reasons:
1. The fourth quarter tends to have higher mortgage delinquencies, possibly due to consumers balancing holiday spending vs. debt payments; and
2. Housing prices continued to deteriorate during the fourth quarter and unemployment remains higher than historical averages.
“This combination leads to more negative equity in homes and reduced real personal income that can affect borrowers’ ability and willingness to pay their mortgages,” Martin says.
“The more encouraging news is that, when looking year over year, more homeowners are making their mortgage payments and the delinquency rate dropped over 6% since fourth quarter 2010,” he continues. “While it’s certainly good to see the rate dropping, at this pace it will take a very long time for mortgage delinquencies to get back to normal.”
Many see the economic environment beginning to brighten, although modestly. Therefore, TransUnion's forecast predicts mortgage borrower delinquency rates to drift downward marginally in 2012.
But in the meantime there may still be a quarter or two of slightly elevated nonpayment rates as some consumers aren’t able to, or decide not to, repay their mortgage debt obligations in light of the uncertain economic outlook.
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.