Delinquency Outlook Favorable in 2012

Mortgage delinquencies should fall to 5% by the end of next year.

December 8, 2011

Although 60-day mortgage delinquencies may rise during the first quarter of 2012, following six-consecutive quarterly declines, lenders can expect an overall decline next year, according to TransUnion’s annual consumer credit forecast.

Credit card delinquencies will remain stable in 2012, TransUnion predicts.

According to the forecast, national mortgage delinquencies will fall to about 5% by year’s end, down from roughly 6% at year-end 2011.

“Although house prices and unemployment will likely face continued pressure next year, this forecast calls for gradual improvements in the second half of 2012 to other key variables,” says Tim Martin, group vice president of U.S. housing in TransUnion’s financial services business unit.

These variables—improving credit quality of new originations, rising consumer confidence, and a healthier gross domestic product—will boost homeowners’ ability and willingness to pay their mortgages, he says.

Highest Mortgage Delinquency States Q4 2012
Florida 13.2%
Nevada 11.9
District of Columbia   7.9%
Lowest Mortgage Delinquency States  
North Dakota 1.3%
South Dakota 1.9
Wisconsin 2.1%

“If things go as expected, there are no additional negative shocks to the U.S. economy and the average borrower's situation, mortgage delinquencies could fall as much as 16% in 2012 compared to 2011,” Martin says.

The expected mortgage delinquency decline in 2012 would follow recent yearly trends, following year-over-year increases of more than 50% between 2006 and 2009.

TransUnion projects 2012 declines in mortgage delinquencies for 38 states, with the largest percentage declines expected in Arizona (-46.25%), Wisconsin
(-45.52%), and Colorado (-40.34%).

Twelve states and the District of Columbia are expected to see increases.

Credit cards

Credit card delinquency rates (90 days or more past due) reached their lowest levels in 17 years during the second quarter of 2011 (0.60%). TransUnion expects them to remain relatively low in 2012, decreasing 7% from 0.74% in during the fourth quarter of 2011 to 0.69% in at year-end 2012.

“Credit card delinquencies are expected to remain fairly steady in 2012, ranging between 0.69% and 0.76%—levels far below those typically observed in the last 15 years,” says Steve Chaouki, group vice president in TransUnion's financial services business unit.

Highest Credit Card Delinquency States Q4 2012
Mississippi 1.03%
Louisiana 0.99
Missouri 0.92%
Lowest Credit Card Delinquency States  
North Dakota 0.36%
Wyoming 0.44
Alaska 0.44%

“In today's uncertain economy, consumers have found that credit cards are among their most valued assets due to the flexibility they provide,” he says. “As a result, consumers have made a concerted effort to make on-time payments and maintain relatively low balances.”

Credit card debt per borrower in the third quarter of 2011 was $4,762, roughly $1,000 less than during second quarter of 2009, the official end of the recession.

The District of Columbia and 39 states are projected to see declines in credit card delinquency rates during 2012. States expected to see the largest credit card delinquency declines next year include Delaware (-30.74%), Oklahoma (-23.74%), and California (-22.97%).

Eleven states will likely experience increases in credit card delinquencies, most notably in Connecticut (14.87%), Missouri (12.46%), and Louisiana (10.11%).

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