Mortgage delinquency rates on the decline

2/12/2014 5:51:16 PM

The rate of mortgage delinquency in the U.S. is lower than it has been in five years, according to data from a recent study by credit reporting agency TransUnion.

The most recent Industry Insights report, a quarterly overview summarizing data, trends and perspectives from the lending industry, revealed that the number borrowers 60 days or more behind on their mortgage payments fell from 4.09 percent at the end of the third quarter of 2013 to 3.85 percent as the year concluded. The latter figure represents the first time since 2008 that the national mortgage delinquency rate has fallen below 4 percent, as well as a significant drop-off from the rate of 5.08 percent at the end of 2012, HousingWire reported.

There is, however, room for improvement, considering that the number of delinquencies nationally remains nearly twice as high as it was prior to the recession. Additionally, tightened credit standards as a result of the housing downturn have limited the number of borrowers who can qualify for a low cost mortgage. Steve Chaouki, TransUnion's head of financial services, noted that the recovery is not complete.

"It's encouraging to see the mortgage delinquency rate drop for two consecutive years, but at the same time, mortgage delinquencies continue to be twice as high as levels observed prior to the housing bubble," said Chaouki. "The housing market also still shows some volatility, with both housing prices and originations dropping in the latter part of 2013 after experiencing improvements in the first part of the year."

Nationwide improvement 
The delinquency rate declined on a year-over-year basis during the final quarter of 2013 in every state, as well as in the District of Columbia. Those declines were in the double digits everywhere but in New Jersey and New York, where many homeowners remained in recovery mode, dealing with the residual effects of Superstorm Sandy.

Meanwhile, thanks to creeping interest rates and those tightening credit conditions, new account originations were on the decline over the same time period, per TransUnion data. The company posted 52.85 million mortgage accounts as of the fourth quarter of 2013, compared with 53.85 million a year earlier.

"Mortgage loans originated in the last few years have significantly higher credit quality than those originated prior to the recession, with delinquency rates that resemble those seen seven to 10 years ago," said Chaouki. "As older mortgages continue to slowly exit the system, the industry will experience continued declines in mortgage overall delinquencies."