The national 60+ day delinquency rate decreased to 6.77% in the first quarter of 2010 after steady increases for 12 consecutive quarters, TransUnion reports. This rate reflects a decrease of 1.74% from the previous quarter's 6.89% average.
Year over year, mortgage delinquencies were up approximately 30% from 5.22%, says TransUnion, which compiled its data using approximately 27 million anonymous, randomly sampled, individual credit files.
Delinquency rates in the first quarter continued to be highest in Nevada (15.98%) and Florida (14.65%), while the lowest mortgage delinquency rates continued to be found in North Dakota (1.76%), South Dakota (2.44%) and Nebraska (2.68%). Seventeen states showed increases in delinquency from the previous quarter, with Alaska (+11.3%), New Hampshire (+6.3%) and Hawaii (+4.8%) 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, TransUnion says. 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.
The average national mortgage debt per borrower decreased 0.47% 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% 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.
On a year-over-year basis at a national level, mortgage originations dropped almost 38%. The drop was across all regions, with the smallest decline in year-over-year originations seen in the District of Columbia (-0.89%), Connecticut (-5.44%) and New York (-9.98%). Alaska, Utah and Idaho experienced the steepest year-over-year declines (-55.9%, -55.6% and -54.5%, respectively).
"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," says FJ Guarrera, a vice president in TransUnion's financial services business unit. "With prices beginning to rise, increasing consumer confidence and positive trends in the equity markets, homeowners 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."
The retirement of the first-time home buyer tax credit could impact mortgage demand and, in turn, home prices, Guarrera adds. Furthermore, the drop in delinquencies is partly influenced by tax-related seasonal factors. Consumer savings resulting from real estate tax deductions may help cover existing mortgage obligations, Guarrera says.
Just as mortgage delinquency trends differ between the national and state economies, metropolitan statistical areas (MSAs) also showed different movements in the first quarter, TransUnion adds.
Sixty percent of the MSAs showed a decrease in their 60-day mortgage delinquency rates since last quarter, as compared to a 14% decrease between the third and fourth quarter of last year. Even in those states that show an overall 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 delinquencies. The Cheyenne, Wyo., MSA, however, showed a decrease of 23.48%. The Fairbanks, Ala., MSA showed a decrease of 1.48%.
Conversely, Arkansas showed the highest overall state decrease in mortgage delinquency rates, yet the Jonesboro, Ark., MSA showed an increase of 1.33%. This trend demonstrates that regional economic dynamics can have a material impact on consumer performance, TransUnion says.
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, the firm's 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, TransUnion's 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," Guarrera says, cautioning that unanticipated economic shocks to the housing market could lead to higher delinquency levels.
With regard to regional forecasts, TransUnion expects Florida to experience the highest mortgage delinquency rate by the end of 2010, reaching as high as 18.%. North Dakota is still expected to continue to exhibit the lowest mortgage delinquency by year-end, with a rate of 1.7%.