After rising slightly to a rate of 6.02 percent in the first quarter, 60-day mortgage delinquencies will resume their decline, falling to about 5 percent of all performing mortgages by the end of next year.
That forecast, from the Transunion credit bureau, is good news for future foreclosure inventories. Sixty-day delinquencies are considered a precursor to foreclosure.
Delinquencies have declined for six consecutive quarterly declines from the fourth cuarter of 2009 through the second quarter of 2011. Transunion expects them to end the year just under 6 percent and continue to rise for several months.
“Although house prices and unemployment will likely face continued pressure next year, this forecast calls for gradual improvements in the second half of 2012 to other key variables, like improving credit quality of new originations, consumer confidence and GDP, that will positively influence homeowners’ ability and willingness to pay their mortgages,” said Tim Martin, group vice president of U.S. housing in TransUnion’s financial services business unit. “If things go as expected, there are no additional negative shocks to the U.S. economy and the average borrower’s situation, mortgage delinquencies could fall as much as 16% in 2012 compared to 2011.”
The expected mortgage delinquency decline in 2012 would follow recent yearly trends, including an expected 7 percent decrease by the end of this year and a 7 percent reduction in 2010. This is in contrast to more than 50 percent year-over-year increases between 2006 and 2009.
TransUnion is projecting 2012 declines in mortgage delinquencies for 38 states with the largest percentage declines expected in Arizona (-46.25 percent), Wisconsin (-45.52 percent) and Colorado (-40.34 percent). Twelve states and the District of Columbia are expected to see increases.