Mortgage Delinquencies to Rise, and Then Fall in 2012; Credit Card Delinquencies to Remain Steady

TransUnion released its annual forecasts today on consumer credit, which indicate that national mortgage loan delinquencies (the ratio of borrowers 60 or more days past due) will decline to about 5% by the end of 2012 from just under 6% at the conclusion of 2011. After six consecutive quarterly declines between Q4 2009 and Q2 2011, 60-day mortgage delinquencies are expected to rise through Q1 2012, peaking at 6.02%. TransUnion forecasts mortgage delinquencies, a statistic generally considered a precursor to foreclosure, to decline for the last three quarters of 2012.

“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, like improving credit quality of new originations, consumer confidence and GDP, that will positively influence homeowners’ ability and willingness to pay their mortgages,” said Tim Martin, group vice president of U.S. housing in TransUnion’s financial services business unit. “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.”

The expected mortgage delinquency decline in 2012 would follow recent yearly trends, including an expected 7% decrease by the end of this year and a 7% reduction in 2010. This is in contrast to more than 50% year-over-year increases between 2006 and 2009.

TransUnion is projecting 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 (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards) reached their lowest levels in 17 years during the second quarter of 2011 (0.60%) and TransUnion expects them to remain relatively low in 2012, decreasing approximately 7% from 0.74% in Q4 2011 to 0.69% in Q4 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,” said Steve Chaouki, group vice president in TransUnion’s financial services business unit. “In today’s uncertain economy, consumers have found that credit cards are among their most valued assets due to the flexibility they provide. As a result, consumers have made a concerted effort to make on-time payments and maintain relatively low balances. In fact, credit card debt per borrower in the third quarter of 2011 stood at $4,762, approximately $1,000 less than the second quarter of 2009, the quarter in which the recession ended.”

Thirty-nine states and the District of Columbia are projected to see credit card delinquency declines in 2012 with only 11 experiencing increases. States expected to see the largest credit card delinquency declines in 2012 include Delaware (-30.74%), Oklahoma (-23.74%) and California (-22.97%). The largest increases are expected in Connecticut (14.87%), Missouri (12.46%) and Louisiana (10.11%).

Here’s some video of TransUnion experts discussing the data:

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 fall more than expected.

The most current mortgage and credit card delinquency data for the nation and every state can be found at www.transunion.com/trenddata.

TransUnion’s Trend Data database TransUnion’s Trend Data is a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion’s national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels. For the purpose of this analysis, the term “credit card” refers to those issued by banks.

As a global leader in information and risk management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering high quality data, and integrating advanced analytics and enhanced decision-making capabilities. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion reaches businesses and consumers in 23 countries around the world.