TransUnion has released its annual forecasts on mortgage delinquency rates, which found that the national mortgage loan delinquency rate (the ratio of borrowers 60 or more days past due) is projected to decline to 5.06 percent by the end of 2013 from an estimated 5.32 percent at the conclusion of 2012. TransUnion forecasts mortgage delinquencies, a statistic generally considered to be a precursor to foreclosure, will decline in 34 states and the District of Columbia with only 13 states experiencing increases.
"As house prices and unemployment slowly improve, TransUnion's forecast indicates that the national mortgage delinquency rate will gradually drop throughout 2013," said Tim Martin, group vice president of U.S. housing in TransUnion's financial services business unit. "While we are encouraged by the direction of the forecast, we would have hoped for a projection that called for a more substantive drop in delinquencies. If the pace of improvement does not pick up, it will take a very long time to get back to 'normal' delinquency rates."
The mortgage delinquency rate peaked in Q4 2009 at 6.89 percent after rising 12 consecutive quarters from its 1.94 percent mark in the fourth quarter of 2006. The 255 percent increase in those three years was unprecedented in its extreme rise. Nearly three years after the peak in mortgage delinquency rates, as of Q3 2012 (the latest actual data available) mortgage delinquencies have only dropped 21 percent to 5.41 percent. If the TransUnion forecast holds true for 2013, the rate would have only dropped about 27 percent in four years and still well above the "normal" delinquency rate range of 1.5 to two percent.
"The slow improvement pace we are experiencing right now seems to be less about new borrowers not being able to make their payments and more about existing borrowers who have been delinquent for a very long time," said Martin. "For example, our analysis shows the delinquency rate would fall to around 2.5 percent, or pretty much normal, if we simply took borrowers who haven't made a mortgage payment in over a year out of the calculation. By comparison, pre-recession, it was unusual for a borrower to go more than six months without either being able to cure their situation or go through the foreclosure process."
TransUnion is projecting the largest mortgage delinquency rate declines to happen in Nevada (-18.62 percent), Minnesota (-13.58 percent), California (-12.14 percent) and Arizona (-11.61 percent). Other states that were most negatively impacted by the mortgage crisis, such as Florida (-8.39 percent), Georgia (-9.19 percent), New Jersey (-4.95 percent) and New York (-7.67percent), also are expected to see declines.
TransUnion's forecasts are based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates and real estate values. The forecasts would change if there are unanticipated shocks to the global economy affecting recovery in the housing market, or if home prices unexpectedly continue to fall.