Mortgage Late-Payment Rate Jumps to 5.88% in Q3, Surprising Some

More borrowers were late on their mortgage payments by 60 days or more in the third quarter, compared to the previous quarter, marking the first jump in the home loan delinquency rate since the end of 2009, reported TransUnion today in its update on credit-active consumers.
The national mortgage delinquency rate increased to 5.88 percent, from 5.82 percent in the second quarter, said the credit-reporting bureau.
It was a surprise move upward because the nation had seen six consecutive quarters of more borrowers making timely payments, despite the ongoing foreclosure crisis and overall housing market malaise.
But high unemployment and stagnant or depressed home values are contributing to more borrowers having to skip mortgage payments, particularly in certain regions.  Many of them face years of being “underwater,” with values exceeding what they owe on their homes.
The highest mortgage delinquency rates in the third quarter were in Florida (14.08 percent); Nevada (12.39 percent); New Jersey (7.6 percent); and Arizona (7.46 percent).
The jump in the third quarter surprised TransUnion.
“We expected that trend to continue given recent, relatively more conservative lending policies and the apparent stabilization of both home values and unemployment,” said Tim Martin, group vice president of U.S. Housing in TransUnion’s financial services business unit.
But Martin also cited the U.S. credit rating downgrade, stock market declines, the European debt crisis concerns and low consumer confidence as factors.
“All of this affects a borrower’s net worth and desire, or ability, to continue making house payments — especially if they are facing negative equity in their homes due to price depreciation,” Martin said.
Between the second and third quarters of 2011, all but 10 states and the District of Columbia saw increases in their mortgage delinquency rates — 64 percent of metropolitan areas registered increases. This is a significant difference compared to the second quarter of 2011 when 21 percent of metropolitan areas recorded a rise in delinquency rates. In the first quarter of 2011, 32 percent of metropolitan areas had an increase.
TransUnion is forecasting that mortgage delinquency rates will drift downward in 2012.  However, the U.S. may see another quarter or two of “slightly elevated nonpayment rates as some consumers are not able to, or decide not to, repay their mortgage debt obligations in light of the uncertain economic outlook.”
TransUnion’s forecast is based on several economic assumptions, such as gross state product, consumer sentiment, unemployment rates and real estate values.

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