Mortgage Loan Delinquencies Rise For Second Time Since 2009

Collections & Credit Risk | Wednesday, February 15, 2012


More homeowners were late with their loan payments in the last three months of 2011, the second quarter in a row that defaults increased, according to credit data giant TransUnion.

Serious mortgage delinquencies, loans on which borrowers were at least 60 days behind on payments, rose to 6.01% in the fourth quarter from 5.88% in the previous quarter.

The increases in those two quarters followed nearly two years of decline.

"To see that, quarter over quarter, fewer homeowners were able to make their mortgage payments is not welcome news," said Tim Martin, group vice president of U.S. housing in TransUnion's financial services business unit.

Between the third and fourth quarters of 2011, all but 13 states experienced increases in their mortgage delinquency rates. On a more granular level, 64% of metropolitan areas saw increases in their mortgage delinquency rates in Q4 2011. This is the same percentage as found in Q3 2011, but up from Q2 2011 when only 21% of MSAs experienced an increase.

Martin said seasonal factors were partly responsible for the increase “perhaps explained by borrowers balancing holiday spending versus debt payments.” In addition, falling housing prices exacerbated negative equity, where homeowners owe more than their houses are worth, while high unemployment and reduced income “can affect borrowers’ ability and willingness to pay their mortgages,” he said.

Delinquencies were down compared with the fourth quarter of 2010, when the rate was 6.41%.

“While it is certainly good to see the rate dropping, at this pace it will take a very long time for mortgage delinquencies to get back to normal," Martin said. 

California’s delinquency rate was 7.14%, ranking fifth among states after Florida (14.27%), Nevada (12.08%), New Jersey (8.32%) and Arizona (7.5%).

TransUnion said mortgage delinquencies probably will increase for the next quarter or two “as some consumers are not able to, or decide not to, repay their mortgage debt obligations in light of the uncertain economic outlook.”