Mortgage Delinquencies Hit ~4% in 3Q

Look out.  To be expected delinquencies are on the rise, almost double historical rates. What does this mean?  Change and Opportunity.   Lenders are going to respond to these delinquencies with trying to balance their portfolios with a heavier weight of on time performers i.e. higher credit score people.  Meanwhile, a recession should push the delinquency rate even higher.    In contrast, the average amount of an outstanding mortgage fell 3.5% to $192,287 in the third quarter.  I’d like to think new home purchases at reduced prices are driving this figure down.  I’m wondering how many quarters it will take to see the delinquency number start to decline.  If you have sat on the sidelines and not purchased a home yet, the timing is really starting look good, especially if you have good credit.

 

NEW YORK (AP) — The percentage of people who are two months behind on their mortgages shot up in the third quarter from the same period last year, according to credit reporting agency TransUnion LLC.

For the quarter ended Sept. 30, 3.96 percent of people holding a mortgage were at least 60 days behind in payments, compared with 2.56 percent in the 2007 third quarter.

“It’s nothing short of staggering,” said Ezra Becker, principal consultant in TransUnion’s financial services group. Becker noted the rate had hovered at about 2 percent for years, until the second quarter 2007, when it started climbing.

Moreover, the climb is not likely going to slow, he said. “Our projections are that it’s not only going to be increasing but it’s increasing at a faster pace,” he said. The fourth quarter of 2008 could see the percentage of mortgages past due jump as high as 4.6 to 4.7 percent, he said, an estimate that reflects the recession and rising unemployment rates. “This is more pessimistic than what we would have forecast a quarter ago,” he acknowledged.

The highest delinquency rates continue to be in Florida, at 7.8 percent, Nevada, at 7.7 percent, California, at 5.8 percent and Arizona at 5.5 percent, TransUnion data showed. Mississippi is fifth, at 4.6 percent.

The states with the lowest delinquency rates were North Dakota, at 1.4 percent, followed by South Dakota, at 1.6 percent, Montana at 1.7 percent, Vermont at 1.8 percent and Wyoming at 2 percent.

The figures are culled from TransUnion Trend Data, which consists of 27 million consumer records randomly sampled each month from the credit reporting agency’s national consumer credit database. TransUnion uses actual reported data on past-due payments. The widely-followed measure of deliquency rates from the Mortgage Bankers Association, a voluntary survey of over 120 mortgage lenders, is due out Friday.

Becker said it is unlikely that mortgage delinquency will level off before 2010.

Meanwhile, while the number of delinquencies rose, the average amount of an outstanding mortgage fell 3.5 percent to $192,287 in the third quarter.

The highest average outstanding mortgage balance is found in the District of Columbia, at $364,015, with California following at $358,899. Hawaii, Nevada and Maryland round out the top five. The lowest average mortgage balances are found in West Virginia, at $94,910, with Mississippi second to last at $103,680. Oklahoma, North Dakota and Arkansas round out the bottom five.

While someone who is 60 days past due on their mortgage is not yet threatened with foreclosure, Becker said it is a strong indicator that someone might not be able to catch up. “Serious delinquency is the point where it’s pretty unlikely that you’re going to be able to come up with the money to bring yourself into good standing,” he said.