Big Drop in Delinquencies Forecast

By:: Kara Johnson | December 07, 2010

Mortgage delinquencies will decline nearly 20 percent over the coming year, driven by an improving economy, according to a new forecast from credit reporting firm Transunion.

The percentage of mortgage holders 60-days past due is predicted to drop to 4.98 percent by the end of 2011, down from an expected 6.21 percent at the end of this year. Credit card delinquencies are also expected to improve, although not as sharply.

"We believe the nation will experience an improvement in mortgage delinquencies during 2011," said Steve Chaouki, a Transunion spokesman. "This will be driven by a slowly improving unemployment picture and continued stabilization in housing prices.”

The company expects that more parts of the country will see increasing property values in 2011,Chaouki said, with some stabilization in states and local markets hardest hit by the recession.

A broad-based improvement is predicted, with double-digit declines in mortgage delinquency rates in all 50 states, with the biggest declines expected in those states with the highest delinquency rates. Florida, Nevada and Arizona are all expected to see declines of nearly 25 percent from current 60+-day delinquency rates of 11.06 percent, 10.89 percent and 7.59 percent, respectively.

Consumers with credit card delinquencies of 90 days or more are expected to fall by more than 10 percent by the end of 2011, to 0.67 percent of all cardholders, down from 0.75 percent currently. Such a decline would mark a 50 percent drop from what is considered the start of the Great Recession in late 2007 and would be the lowest figure in 16 years.

Ezra Becker, a TransUnion executive, said a number of factors have affected consumer credit card use, including the Credit CARD Act, which has affected interest rates and other credit card pricing, and a trend by consumers toward paying their credit card bills before their mortgages.

"For 2011, TransUnion does not expect to see any material change in the mindset of consumers.” Becker said. “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 report was based on an analysis of a random sample of 27 million consumer records from TransUnion’s national credit database, generated quarterly.

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