TransUnion's quarterly analysis of trends in the mortgage industry found that mortgage loan delinquency (the ratio of borrowers 60 or more days past due) increased for the 12th straight quarter, hitting an all-time national average high of 6.89% for the fourth quarter of 2009, the company says. This quarter marks the first time the mortgage delinquency rate increase did not decelerate after doing so for three consecutive periods.
This statistic, which is traditionally seen as a precursor to foreclosure, increased 10.24% from the previous quarter's 6.25% average. Year-over-year, mortgage borrower delinquency is up approximately 50% (from 4.58%).
The report is part of an ongoing series of quarterly consumer lending sector analyses from TransUnion focusing on credit card, auto loan and mortgage data. Information for this analysis is culled quarterly from approximately 27 million anonymous, randomly sampled, individual credit files, representing approximately 10% of credit-active U.S. consumers.
Mortgage borrower delinquency rates in the fourth quarter of 2009 continued to be highest in Nevada (16.19%) and Florida (14.93%), while the lowest mortgage delinquency rates continued to be found in North Dakota (1.84%), South Dakota (2.46%) and Alaska (2.84%). Areas showing the greatest percentage growth in delinquency from the previous quarter were the District of Columbia (+20.2%), Louisiana (+17.7%) and Delaware (+14.8%).
Unlike the third quarter, no state showed a decrease in mortgage delinquency rates from the previous period.
The average national mortgage debt per borrower increased 0.29% to $193,690 from the previous quarter's $193,121. On a year-over-year basis, the fourth-quarter 2009 average represents a 0.47% increase over the fourth-quarter 2008 average mortgage debt per borrower level of $192,789, which further suggests stabilization in housing prices, TransUnion says.
The area with the highest average mortgage debt per borrower was the District of Columbia, at $372,869; followed by California, at $352,688; and Hawaii, at $317,599. The lowest average mortgage debt per borrower was in West Virginia, at $99,028. Quarter over quarter, the District of Columbia showed the greatest percentage increase in mortgage debt (+3.63%), followed by Vermont (+3.03%) and Georgia (+2.38%). Areas showing the largest percentage drop in average mortgage debt were Alaska (-3.5%), South Dakota (-1.58%) and Nevada (-1.26%).
The news was not altogether bad for the mortgage sector in the fourth quarter, as bright spots appeared at the metropolitan level. Thirty-eight metropolitan statistical areas (MSAs) showed a decrease in their mortgage loan delinquency rates since the third quarter of 2009. Heading the pack for improving credit conditions were Corvallis, Ore.; Lafayette, Ind.; and Sharon, Pa. This compares to only 27 MSAs that showed a quarterly decrease in delinquency last year between the third and fourth quarters.
‘At the national level, these results are in part due to seasonality effects. Consumers tend to run low on cash at the end of the year, after spending for the holidays, but before receiving year-end bonuses and tax refunds,’ says FJ Guerrera, vice president of TransUnion's financial services business unit. ‘At a more granular level, variations in delinquency highlight the fact that the recession and the eventual recovery are both regional phenomena tied, for the most part, to localized house-price conditions and unemployment levels."
TransUnion's 60-day mortgage delinquency rate forecast made at the beginning of the year fell in line with year-end 2009 actual results – falling short by about 2.5%. TransUnion's forecasts for this year are slightly more pessimistic than before, due to questions concerning house-price appreciation, the continued high level of unemployment and the potential eroding of consumer confidence as the effects of the government stimulus begin to fade.
"We're not out of the woods yet," Guerrera says. "The continuing rise in foreclosures, in conjunction with low consumer confidence in the housing market, continues to hinder housing value appreciation and impede recovery in the mortgage industry. Furthermore, there is wave of adjustable rate mortgages that have yet to reset. Many of these are option and Alt-A loans. When the interest rates on these loans reset, many consumers potentially will not be able to meet their debt obligations."
TransUnion predicts the 60-day delinquency rate will peak between 7.5% and 8% this year, "depending on the prevailing economic conditions associated with the housing market," Guerrera adds.
With regard to regional forecasts, Nevada is still anticipated to experience the highest mortgage delinquency rate by mid-2010, reaching as high as one in five mortgage borrowers. North Dakota is expected to continue to exhibit the lowest mortgage delinquency rate by the summer – less than one in 50 borrowers, with forecasts showing a downward trend over the course of the year.