Mortgage delinquency is on track for its fourth annual improvement, albeit the degree of improvement is diminishing. The outlook for next year is another decline.
In the third quarter of this year, 60-day delinquency on residential loans fell to 4.09 percent from the previous period’s 4.32 percent.
Compared to the same three-month period in 2012, the 60-day mortgage delinquency rate was down 124 basis points.
TransUnion, which reported the statistics, issued its mortgage delinquency forecast on Thursday.
The data service provider predicts that mortgage delinquency fill finish the fourth quarter at 3.94 percent.
By the end of 2014, the rate is expected to retreat to 3.75 percent.
While next year will mark the fifth consecutive year of decline, the 19-basis-point drop from the end of 2013 will be the smallest improvement observed during the five-year period. In addition, it will be the first time the decline was less than the previous year since 2010.
“The primary reason for the slowdown will be the pending rise in interest rates, which may hinder home sales while also blocking refinancing as an exit strategy for some mortgage borrowers,” TransUnion Group Vice President of U.S. Housing Tim Martin said in the announcement. “Additionally, foreclosure timelines continue to expand in many states, keeping longer vintage delinquencies in the system.”
Still, any decline is better than the nearly 50 percent rise in mortgage delinquency during both 2008 and 2009.
The rate peaked at 6.88 percent in the fourth-quarter 2009.
TransUnion expects the biggest decline between 2013 and 2014 — 25.2 percent — to occur in Nevada. Florida mortgage delinquency is expected to fall 15.3 percent, while Georgia is forecasted to see an 11.7 percent drop. TransUnion has delinquency falling 10.2 percent in Michigan and 10.2 percent in New Jersey.
Martin said he is “encouraged” that the most hard-hit states are leading the way in delinquency improvement.
North Dakota, where foreclosures have been nearly nonexistent, is expected to have a 47.7 percent increase in delinquency — worse than any other state.
U.S. subprime mortgage performance has struggled more than the overall population, with 60-day delinquency at 36.56 percent as of September versus 42.96 percent in the first-quarter 2010.
“The encouraging story surrounding subprime delinquency rates is that most of the decline observed has occurred since the beginning of 2012,” Martin explained. “As interest rates stayed low, house prices started to rebound — and that gave many subprime borrowers the option of refinancing or selling their way out of the delinquent mortgage before the log jammed foreclosure process caught up to them.”
In the second-quarter 2007, when TransUnion first started tracking home loan delinquency, the overall rate was 2.23 percent and the subprime rate was 20.52 percent.
