Late payments on home loans peaked three years ago and have recently been improving. A new forecast has delinquency rates falling even further this year and next year — and some of the hardest-hit states are expected to see the biggest improvements. But a return to normal delinquency levels remains far from certain.
Residential loan delinquency of at least 60 days was recently reported at 5.41 percent as of Sept. 30. That was an 8-basis-point improvement from three months earlier and 47 BPS better than at the same point a year earlier.
The rate of past-due payments peaked in the fourth-quarter 2009 at 6.89 percent following 12 consecutive quarters of increases.
A forecast released Wednesday by TransUnion has 60-day mortgage delinquency falling even further through the end of next year. The findings were culled from a database consisting of 27 million anonymous consumer records.
According to TransUnion, the mortgage delinquency rate is forecasted to end 2012 at 5.32 percent.
By the end of next year, servicers are expected to lop off another 26 BPS from the delinquency rate to leave the 60-day rate at 5.06 percent.
“As house prices and unemployment slowly improve, TransUnion’s forecast indicates that the national mortgage delinquency rate will gradually drop throughout 2013,” Tim Martin, group vice president of U.S. housing in TransUnion’s financial services business unit, said in the report. “While we are encouraged by the direction of the forecast, we would have hoped for a projection that called for a more substantive drop in delinquencies.
“If the pace of improvement does not pick up, it will take a very long time to get back to ‘normal’ delinquency rates.”
Martin went on to explain that most distressed loans today have been delinquent “for a very long time.” Early defaults aren’t a problem on new originations.
A of Dec. 31, 2013, Florida is expected to have the highest mortgage delinquency rate: 11.68 percent. Nevada follows at 8.35 percent, then New Jersey’s 7.68 percent.
While the prediction has delinquency rates falling in 34 states and Washington, D.C., another 13 states will see deterioration.
Next year’s lowest delinquency rates are forecasted to be 1.51 percent in North Dakota, 2.30 percent in Nebraska and 2.38 percent in South Dakota.
The biggest improvement is expected in Nevada, where delinquency is forecasted to decline 19 percent. Minnesota is expected to see a 14 percent improvement, while California is predicted to experience a more than 12 percent decline and Arizona’s rate is projected to fall almost 12 percent.