The rate of borrowers 60 days or more delinquent on their mortgages dropped 23.3% in the past year, ending Q3 2013 at 4.09% from5.33% in Q3 2012of all homeowners with a mortgage according to Transunion, one of the nation’s top three credit bureaus.
All 50 states and the District of Columbia experienced a decline in their mortgage delinquency rates between Q3 2012 and Q3 2013. Five states — California, Arizona, Nevada, Colorado and Utah — experienced 30%+ declines in their mortgage delinquency rate. Three states — California, Florida and Nevada — had double-digit percentage drops in the last quarter. Nationally the mortgage delinquency rate also dropped on a quarterly basis, down 5.3% from 4.32% in Q2 2013, the seventh straight quarterly decline.
The data provided are gathered from TransUnion’s proprietary Industry Insights Report, a quarterly overview summarizing data, trends and perspectives on the U.S. consumer lending industry. The report is based on anonymized credit data from virtually every credit-active consumer in the United States.
“This isn’t a sample data set,” said Tim Martin, group vice president of U.S Housing for TransUnion’s financial services business unit. “We looked at all 52 million installment-based mortgages in the U.S. and the trend is clear — the percentage of borrowers willing and able to make their mortgage payments continues to improve. The overall delinquency rate is still high relative to ‘normal,’ but a 23% year over year improvement is great news for homeowners and their lenders.”
TransUnion recorded 52.31 million mortgage accounts as of Q3 2013, down from 54.23 million in Q3 2012. This variable was as high as 63.14 million in Q3 2008 prior to the housing crisis.
Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 2.34 million in Q2 2013, up from 2.09 million in Q2 2012. This is a major increase from just two years ago when there were 1.32 million new account originations in Q2 2010.
“New mortgage originations showed good growth through the second quarter of this year, largely the result of increased refinance transactions driven by low rates and increasing home prices,” said Martin. “However, mortgage rates started to increase right around Memorial Day, and when the data come out next quarter, we expect it to show that new originations are decreasing as a result.”
TransUnion’s latest mortgage report also found that the non-prime population (those consumers with a VantageScore® credit score lower than 700) continues to represent a smaller portion of all mortgage loans, more than 50% lower than was observed in 2007. Non-prime borrowers constituted 5.82% of all new mortgage originations in Q2 2013. In Q2 2008, non-prime borrowers represented 12.69% of the total.
TransUnion is forecasting that the downward consumer delinquency trend will continue in the final three months of 2013. The delinquency rate will likely be just under 4% at the end of the year.
TransUnion’s forecast is based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income, and real estate values. The forecast would change if there are unanticipated shocks to the economy affecting recovery in the housing market or if home prices begin to depreciate once again.
“New originations will be down and non-prime borrowers will start to re-emerge,” said Martin. “At this point we believe delinquency rates will continue to decline.”
This information is reported by TransUnion and is part of its ongoing series of quarterly analyses of credit-active U.S. consumers and how they are managing credit related to mortgages, credit cards and auto loans. TransUnion’s previous quarterly reports utilized the company’s Trend Data database, which consisted of 27 million anonymous consumer records randomly sampled every quarter from TransUnion’s national consumer credit database. The latest reports now include nearly all active credit consumers.