National Mortgage Delinquencies Fall 1.74 Percent in Q1: TransUnion

TransUnion’s quarterly analysis of trends in the mortgage industry found that national mortgage loan delinquency rate (the ratio of borrowers 60 or more days past due) decreased in the first quarter of 2010 after steady increases for 12 consecutive quarters. The delinquency rate dropped to 6.77 percent — a level slightly lower than in the fourth quarter of last year.

This statistic, which is traditionally seen as a precursor to foreclosure, reflects a decrease of 1.74 percent from the previous quarter’s 6.89 percent average. Year over year, mortgage borrower delinquency is still up approximately 30 percent (from 5.22 percent).

The report is part of an ongoing series of quarterly consumer lending sector analyses focusing on credit card, auto loan and mortgage data available on TransUnion’s Web site. Information for this analysis is culled quarterly from approximately 27 million anonymous, randomly sampled, individual credit files, representing approximately 10 percent of credit-active U.S. consumers and providing a real-life perspective on how they are managing their credit health.

Quarterly Statistics

Mortgage borrower delinquency rates in the first quarter of 2010 continued to be highest in Nevada (15.98 percent) and Florida (14.65 percent), while the lowest mortgage delinquency rates continued to be found in North Dakota (1.76 percent), South Dakota (2.44 percent) and Nebraska (2.68 percent). Seventeen states showed increases in delinquency from the previous quarter with Alaska (+11.3 percent), New Hampshire (+6.3 percent) and Hawaii (+4.8 percent) leading the pack.

Measures of later-stage mortgage delinquency, such as the ratio of borrowers 90 or 120 or more days past due, provide additional positive news. Although these measures do not yet show a decrease from the previous quarter, their increases were the smallest since the recession began in the fourth quarter of 2007. In other words, later-stage mortgage delinquency deterioration is leveling off, as expected.

The average national mortgage debt per borrower decreased (0.47 percent) to $192,774 from the previous quarter’s $193,690. On a year-over-year basis, the first quarter 2010 average represents a 1.39 percent decrease over the first quarter 2009 average mortgage debt per borrower level of $195,500.

The area with the highest average mortgage debt per borrower continued to be the District of Columbia at $369,526, followed by California at $351,506 and Hawaii at $314,132. The lowest average mortgage debt per borrower was still in West Virginia at $99,677. Quarter over quarter, South Dakota showed the greatest percentage increase in mortgage debt (+1.68 percent), followed by Oklahoma (+1.45 percent) and North Dakota (+0.96 percent). Areas showing the largest percentage drop in average mortgage debt were Georgia (-2.96 percent), Vermont (-1.93 percent) and New Mexico (-1.50 percent).

On a year-over-year basis at a national level, mortgage originations dropped almost 38 percent. The drop was across all regions, with the smallest decline in year-over-year originations seen in the District of Columbia (-0.89 percent), Connecticut (-5.44 percent), and New York (-9.98 percent). Alaska, Utah and Idaho experienced the steepest year-over-year declines (-55.9 percent, -55.6 percent, and -54.5 percent, respectively).

Analysis

"The fall in mortgage delinquency is indeed good news for the consumer, the mortgage industry, and the current economic recovery," said FJ Guarrera, vice president in TransUnion’s financial services business unit. "The February rise in the S&P/Case-Shiller home price index and the recent year-over-year increases in median existing home prices reflect the uptick in housing demand, despite the downward pressure exerted by the continual influx of foreclosures. With prices beginning to rise, increasing consumer confidence and positive trends in the equity markets, home owners who are currently upside down on their mortgages may be less inclined to join the ranks of defaulters, which have been growing in number since the summer of 2008.

"However, part of the first quarter demand for new homes was fueled by the First-Time Homebuyer Credit, which was extended to April 30, along with the provision allowing some current home owners to also qualify. Once this runs out, we could see some impact on mortgage demand and therefore home prices — all other things remaining equal. Finally, the dip in mortgage delinquencies is influenced in part by seasonal factors during the tax season, as many homeowners reap the benefits of real estate deductions — tax savings that can be used to keep current on existing mortgage obligations."

Just as mortgage delinquency trends differ between the national and state economies, metropolitan areas also showed different movements in the first quarter of this year. Sixty percent of the metropolitan statistical areas (MSAs) showed a decrease in their 60-day mortgage delinquency rates since last quarter, as compared to a 14 percent decrease between the third and fourth quarter of last year. Even in those states which show an overall deterioration (i.e., an increase) in mortgage delinquency, some metropolitan areas still showed improvement over the previous quarter. For example, Wyoming and Alaska both showed an increase in mortgage delinquency, however, the Cheyenne, Wyoming MSA showed a decrease of 23.48 percent, and the Fairbanks, Alaska MSA showed a decrease of 1.48 percent. Conversely, Arkansas showed the highest overall state decrease in mortgage delinquency rates, yet the Jonesboro, Arkansas MSA showed an increase of 1.33 percent. This clearly demonstrates regional economic dynamics can have a material impact on consumer performance.

Forecast

Beginning with the projections made in the summer of 2008, TransUnion’s forecasting models indicated that mortgage delinquency rates would be leveling off in mid 2010 at both the state and national levels. Upon each forecasting exercise that followed, our models consistently reflected this view, which is based on underlying economic assumptions as to house prices, unemployment rates, consumer confidence, loan-to-value ratios, and other factors impacting the mortgage sector. To the extent these assumptions were overly conservative, in particular regarding house prices and unemployment, our forecasts for the first quarter of 2010 were slightly higher than what actually occurred.

"Based on revised economic assumptions, which are now more optimistic than before, TransUnion believes that the 60-day mortgage delinquency rate will likely continue to drop in 2010, possibly to as low as 6.3 percent. Note that this forecast is dependent upon economic conditions, and may change if there are unanticipated shocks to the economy affecting the recovery in the housing market," said Guarrera.

With regard to regional forecasts, Florida is anticipated to experience the highest mortgage delinquency rate by the end of 2010, reaching as high as 18.2 percent. North Dakota is still expected to continue to exhibit the lowest mortgage delinquency by year-end with a rate of 1.7 percent.

TransUnion’s Trend Data(SM) 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 associates in more than 25 countries on five continents. www.transunion.com/business

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