Mortgage delinquency shows record declines

February 12th, 2014

The mortgage delinquency rate is at record lows, suggesting that more homeowners are able to manage their home loan payments.

Recent data from TransUnion showed that 60-day mortgage delinquency is at record-low levels.

The latest TransUnion mortgage delinquency report showed that the rate hit a five-year low, dropping below 4 percent for this first time since 2008. By the conclusion of the fourth quarter of 2013, the national delinquency rate was 3.85 percent, a noticeable decrease from 4.09 percent in the third quarter. The latest figure marked the eighth consecutive quarter of declines. There was a 24 percent decrease year over year.

Compared to the fourth quarter of 2012, all 50 states and the District of Columbia experienced a drop in the rate of mortgage delinquencies in the fourth quarter of 2013. Additionally, there were double-digit percentage declines year over year for all states except New Jersey and New York.

“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 Steve Chaouki, head of financial services for TransUnion. “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.”

Chaouki’s sentiment is shared by many industry experts. Although housing data has been mostly showing positive trends during the housing recovery, further progress is necessary – which can be accomplished through the continued successes seen in sales, mortgage performance and price appreciation.

A continuing trend
TransUnion predicted that the mortgage delinquency rate will dip further in the first quarter of 2014. The credit agency forecasted that the rate will fall to 3.7 percent by the end of March. Chaouki noted that home loans originated within the past few years have gone to borrowers with healthier credit than those who were approved before the recession – a major factor in the subprime mortgage crisis that paired many homebuyers with home loans they could not afford to repay.

He stated that the elimination of risky mortgages will aid in further lowering the delinquency rate. This trend can be facilitated through the Consumer Financial Protection Bureau’s Qualified Mortgage rule, which creates guidelines for home loan products to protect borrowers from possibly volatile mortgages such as interest-only options.