Mortgage delinquencies will drop nearly 20 percent by the end of 2011 to 4.98 percent of all mortgages from an expected 6.21 percent at the end of 2010, according to the latest forecast from TransUnion, one of the three top credit rating bureaus.
This year’s projected decrease in 60-day mortgage delinquencies, a statistic generally considered a precursor to foreclosure, would more than double the 9.87 percent yearly decline registered from 2009 to 2010, a drop from 6.89 percent to 6.21 percent.
Beginning in 2006, delinquencies rose dramatically for three years. They rose 54 percent from 2006 to 2007, 53 percent from 2007 to 2008 and 50 percent from 2008 to 2009.
TransUnion is projecting double-digit declines in mortgage delinquencies for every state and the District of Columbia through 2011. The states projected to experience the greatest decreases in mortgage delinquencies — Nevada (-24.77 percent), Arizona (-24.27 percent) and Florida (-23.90 percent) — are the same areas expected to have the highest 60-day mortgage delinquency rates at the end of next year (Florida — 11.06 percent; Nevada — 10.87 percent; Arizona — 7.59 percent).
North Dakota (1.12 percent), South Dakota (1.80 percent) and Nebraska (2.05 percent) should continue to rank among the states with the lowest delinquency rates at the end of next year.
“We believe the nation will experience an improvement in mortgage delinquencies during 2011,” said Steve Chaouki, group vice president in TransUnion’s financial services business unit. “This will be driven by a slowly improving unemployment picture and continued stabilization in housing prices. While there is continued price pressure in many markets, we expect a growing number of areas of the country to experience a rise in property values along with some stabilization of values in those states and markets hardest hit by the recession.”
TransUnion also released national year-end 2011 credit card delinquency rate forecasts (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards) that indicate consumers will experience a 10.67 percent decline from a projected 0.75 percent delinquency rate at the end of 2010 to 0.67 percent at the conclusion of 2011. The projected 90-day credit card delinquency rate at the end of 2011 would mark a 50.7 percent drop from the beginning of the Great Recession (1.36 percent in Q4 2007) and constitute the lowest number since 1995.
“Seasonality aside, the percentage of bank card borrowers delinquent on one or more bank-issued, general-purpose credit cards is expected to continue to decline generally through 2011, reaching levels not seen in more than a decade,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “Many factors have influenced the way consumers view and utilize credit card credit, including the Credit CARD Act, which has shifted the way lenders market and price this instrument; the payment hierarchy flip consumers displayed this past year — paying credit card bills before their mortgages; dramatic increases in the volume and duration of unemployment; and of course, home value depreciation.
“For 2011, TransUnion does not expect to see any material change in the mindset of consumers. Although the economy is expected to improve, in the short term consumers are likely to continue to view their credit cards as instruments to get them through difficult financial straits, so we expect they will continue to utilize them prudently.”
The source of the underlying data used for this analysis is TransUnion’s Trend Data, a one-of-a-kind database consisting of approximately 27 million anonymous/de-personalized consumer records randomly sampled every quarter from TransUnion’s national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels.