Mortgage Delinquencies Could Drop By End of 2012

The rate of late mortgage payments could actually make a sizable drop by the end of next year, as long as there are no new major upsets to the economy, according to credit reporting agency TransUnion.

“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, a group vice president in TransUnion’s financial services business unit, as quoted in an MSN Money article. “If things go as expected … mortgage delinquencies could fall as much as 16% in 2012 compared to 2011.”

TransUnion predicts that mortgage delinquency rate for borrowers who are 60 or more days late on their payments will move up to 6 percent during the first quarter of 2012, but could very well fall back down to 5 percent before the start of 2013. That is down significantly from the cyclical peak of 6.89 percent from the last three months of 2009.

While the forecast is partly based on expectations of improvement in consumer confidence and economic growth, it is also due to predictions about the backlog of foreclosures currently in process. As the nation’s lenders work their inventory of foreclosures after the ‘robo-signing’ mess from last fall, the rate of seriously delinquent loans will drop as those properties are foreclosed and the loans are removed from the books.

And while that means TransUnion believes overall foreclosure numbers will drop in 2012 and the delinquency rate decrease forecast is encouraging, the new rate will still be dramatically higher than the average 60-day-plus late rate from before the recession of 1.5 percent to 2 percent.

As Steven Chaouki, a TransUnion vice president put it,

“We have a long way to go to get back.”

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