Mortgage Delinquencies Hit New Record

By:: Kara Johnson | February 17, 2010

Mortgage delinquencies – the percentage of homeowners 60 days or more past due on their home loan payments – hit an all-time high in the fourth quarter of 2009, according to new figures released today by data analysis firm TransUnion.

Delinquent mortgages increased to 6.89 percent of all outstanding home loans, according to the report, marking 12 straight quarters of rising delinquencies. In addition, the delinquency rate increased at a faster pace than in the previous quarter, ending three quarters in which the rate of increase had slowed.

Delinquencies up 50 percent in one year

The 6.89 percent rate represented a 10.24 percent increase over the third quarter rate of 6.25 percent. The delinquency rate is typically regarded as an indicator of future foreclosures. Compared to the last quarter of 2008, the delinquency rate represents a 50 percent increase over one year before.

"At the national level, these results are in part due to seasonality effects,” said F.J. Guarrera, TransUnion vice president of financial services. “Consumers tend to run low on cash at the end of the year, after spending for the holidays, but before receiving year-end bonuses and tax refunds.”

Guarrera noted that while the decline in housing prices has slowed considerably from one year before, a number of factors continue to impede the recovery of the housing market and mortgage industry. He noted in particular that large numbers of adjustable rate mortgages that are scheduled to reset in the near future, many of them Option and Alt-A loans, with the results that many homeowners will no longer be able to afford their mortgage payments.

Predicted to top out near 8 percent

The report forecast that the 60-day delinquency rate will peak between 7.5 percent and 8 percent during 2010, depending on prevailing housing conditions.

"We are now facing the challenge of achieving consistent growth in home sales and thereby improving home values," added Guarrera. "Even with the introduction and extension of multiple tax incentives available to both home buyers and sellers, home sales decreased in December of 2009. As the unemployment rate is expected to hover near 10 percent for the remainder of 2010, consumer spending will likely remain tepid."

The study is based on a database of 27 million anonymous consumer records that are sampled at random every three months. Each record includes more than 200 credit variables that illustrate consumer credit use and performance.

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