Past-Due Mortgages Edge Upward

By:: Kara Johnson | November 08, 2011

Mortgage delinquencies have risen for the first time since late 2009, generating concerns over the direction of the U.S. housing market.

The share of homeowners at least 60 days past due on their home loans edged up to 5.88 percent in the third quarter of the year, according to figures released today by the credit reporting firm TransUnion. That’s only a slight increase, a 1 percent increase in total numbers from the 5.82 percent rate reported for the second quarter of the year.

Even so, the change was seen as a significant reversal of what had been a gradual improvement in homeowner finances.

“Until this quarter, we had seen six straight quarters where progressively more people were able to make their mortgage payments on time,” said Tim Martin, a Transunion executive. “We expected that trend to continue given recent, relatively more conservative lending policies and the apparent stabilization of both home values and unemployment."

Economic uncertainty blamed

Martin attributed the setback to several economic shocks that affected borrower’s net worth and their ability and desire to continue making mortgage payments, particularly if they are underwater on their home loans. These included declining stock prices and home values, recent economic uncertainty and low consumer confidence.

The increase in mortgage delinquencies was broad-based, with 40 states experiencing higher rates of past-due loans, as well as two-thirds of major metropolitan areas.

Transunion predicts the upturn will be short-lived, and that mortgage delinquency rates will once again start heading downward in 2012. However, the company projects that continued economic uncertainty could boost delinquency rates slightly for another quarter or two, as more borrowers are unable to meet their mortgage payments or simply opt not to.

The U.S. mortgage delinquency rate has shown significant improvement over the past year, down from 6.44 percent in the third quarter of 2010, an 8.7 percent decline in absolute numbers of past due loans.

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