TransUnion.com: Mortgage Delinquency Rates Rise for Seventh Straight Quarter

TransUnion.com released today the results of its analysis of trends in the mortgage industry for the third quarter of 2008. The report is part of an ongoing series of quarterly consumer lending sector analyses focusing on credit card, auto loan and mortgage data to be released on TransUnion’s Web site.

Statistics

Mortgage loan delinquency (ratio of borrowers 60 or more days past due) increased for the seventh straight quarter, hitting a national average high of 3.96 percent for the third quarter of 2008. Traditionally seen as a precursor to foreclosures, this statistic is up more than 12 percent from the previous quarter’s 3.53 percent average and up approximately 54 percent from the same period last year.

Mortgage borrower delinquency rates in the third quarter of 2008 were highest in Florida (7.82 percent) and Nevada (7.71 percent), while the lowest mortgage delinquency rates were found in North Dakota (1.35 percent), South Dakota (1.6 percent) and Montana (1.71 percent).

Average national mortgage debt per borrower rose slightly (0.2 percent) to $192,287 from the previous quarter’s $191,681 total. However, the third quarter 2008 average represents a 3.45 percent drop compared to the third quarter 2007 average of $199,168.

The area with the highest average mortgage debt per borrower was District of Columbia at $364,015, followed by the California at $358,898 and Hawaii at $305,873. The lowest average mortgage debt per borrower was in West Virginia at $94,910. Quarter to quarter, Wyoming showed the greatest percent increase in mortgage debt (4.69 percent), followed by North Dakota (3.75 percent) and Alaska (2.4 percent). Areas showing the largest percentage drop in average mortgage debt were Kansas (-1.18 percent), Nevada (-1.01 percent), and then California (-0.85 percent).

Analysis

In the third quarter, the market continues to see the effect of the mortgage crisis deepen as the growth in delinquency rates were found to be greater (12.18 percent) than that experienced in the first two quarters of 2008 (9.29 percent).

The three areas showing the greatest percentage growth in delinquency from the previous quarter were District of Columbia (42.7 percent), North Dakota (22.7 percent) and Idaho (21.7 percent). Only West Virginia experienced a drop in borrower delinquency ratio over the previous quarter: (-0.39 percent).

"As expected, the mortgage sector continued to experience increases in the delinquency rate due to worsening economic conditions in both the labor and financial markets," said Keith Carson, a senior consultant in TransUnion’s financial services group. "The third quarter of 2008 showed not only an increase in the nation’s unemployment rate and declines in both home prices and per capita disposable income, but also a deeper slide in consumer confidence. Combined with the reluctance of lending institutions to extend credit except to the most credit worthy consumers, many current home owners may find their repayment options limited in a rapidly deteriorating economic environment."

Forecast

"Our forecasting models predict that the national 60-day mortgage delinquency rate among mortgage borrowers will continue to rise in the fourth quarter of 2008 and throughout 2009, with the 2008 delinquency rates ending at 4.66 percent and 2009 rates possibly reaching 7 percent or greater," said Carson. "These numbers, which are more pessimistic than anticipated one quarter ago, are due to the significant weaknesses recently highlighted in the financial markets as the U.S. economy moves deeper into a recession. These recessionary pressures will have a subsequent impact in the economy through increases in unemployment, continued declines; in housing prices, retail sales, consumer confidence, and disposable income. However, depending on the severity of the capital markets crisis, the ultimate outcome of the decline in the U.S. auto industry and the timing of a recovery in retail sales, we see the possibility of a flattening of mortgage delinquencies as the economy begins to stabilize and some sectors of the country begin to improve in the second quarter of 2010."

As far as state projections go, Florida (9.7 percent) is anticipated to experience the highest average delinquency rate by the end of 2008, while North Dakota (1.45 percent) is expected to show the lowest level of delinquency.

TransUnion’s Trend Data database
The source of the underlying data used for this analysis is TransUnion’s Trend Data, 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.

About TransUnion
As a global leader in credit and information 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 comprehensive data and advanced analytics and decisioning. 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 employs more than 3,600 employees in more than 25 countries on five continents. www.transunion.com