In the wake of much tighter lending standards, mortgage delinquency rates are slowly moving downward. According to data from credit bureau TransUnion, the percent of homeowners who were behind by 60 days or more on their mortgages, fell to 5.82 percent during the second quarter of this year, from 6.67 percent the previous spring. That’s a six-quarter streak of delinquency rate declines, and it is also down from the recent market peak of 6.9 percent in the fourth quarter of 2009.
Newer homebuyers with stellar credit records, and thus less likely to default, are helping to pull the rate up.
“Newer vintages of mortgages are performing better and becoming a bigger portion of outstanding mortgage universe,” said TransUnion’s Tim Martin as quoted in a Washington Post article.
He also added,
“Not only are these consumers less likely to default if house prices continue to edge downward throughout the year, but their willingness to repay their debt obligations in the face of high unemployment rates is greater. It is because of these dynamics that lenders today take a much closer look at the borrower’s income history and overall debt situation than before the recession began in 2007.”
Delinquency rates fell in 49 of the 50 states, with only Vermont posting a small gain. The highest rates of late payments remain concentrated in four states: Florida with a 13.91 percent delinquency rate, Nevada at 13.04 percent, California at 7.83 percent, and Arizona with a 7.78 late payment pace.
While the declines over the past six quarters are certainly a positive trend, the national delinquency rate is still three times as high as the pre-housing bust average. Said Martin,
“It took three calendar years for delinquencies to run up to their peak. We’re one-and-a-half years since that peak, and we’ve recovered about 22 percent. It’s taking longer to come down than it did to go up.”
At the current pace, it will take until 2015 before the rate is back to pre-recession levels. We can certainly hope for a major boost in the employment market though, which would speed the recovery of the delinquency numbers.