TransUnion.com: Home Loan Delinquency Rates Rise for Eighth Straight Quarter

Chicago – TransUnion.com released today the results of its analysis of trends in the home loan industry for the fourth quarter of 2008 and the associated impact on the U.S. consumer. The report is part of an ongoing series of quarterly consumer lending sector analysis focusing on credit card, auto loan and mortgage data available on TransUnion’s Web site. Information for this analysis is culled quarterly from approximately 27 million anonymous, individual credit files, providing a real-life perspective on how U.S. consumers are managing their credit health.

Statistics

Home loan delinquency (ratio of borrowers 60 or more days past due) increased for the eighth straight quarter, hitting a national average high of 4.58 percent for the fourth quarter of 2008. Traditionally seen as a precursor to foreclosures, this statistic is up almost 16 percent from the previous quarter’s 3.96 percent average and up approximately 53 percent from the same period last year (2.99 percent).

Mortgage borrower delinquency rates in the fourth quarter of 2008 were highest in Florida (9.52 percent) and Nevada (9.01 percent), while the lowest mortgage delinquency rates were found in North Dakota (1.21 percent), Alaska (1.74 percent) and South Dakota (1.97 percent). The three areas showing the greatest percentage growth in delinquency from the previous quarter were Arizona (26.2 percent), Montana (24.5 percent) and South Dakota (23.9 percent). However, the news is not altogether bad: North Dakota and Alaska both showed a decline in mortgage delinquency rates, down respectively from the previous quarter’s 10 percent and 19 percent.

The average national mortgage debt per borrower rose slightly (0.26 percent) to $192,789 from the previous quarter’s $192,287. On a year-over-year basis, the fourth quarter 2008 average represents a 0.74 percent increase compared to the fourth quarter 2007 average of $191,370.

The area with the highest average mortgage debt per borrower was California at $356,421, followed by the District of Columbia at $354,082 and Hawaii at $310,289. The lowest average mortgage debt per borrower was in West Virginia at $96,242. Quarter to quarter, Illinois showed the greatest percent increase in mortgage debt (2.55 percent), followed by Texas (1.96 percent) and Louisiana (1.89 percent). Areas showing the largest percentage drop in average mortgage debt were the District of Columbia (-2.72 percent), Wisconsin (-1.5 percent) and Rhode Island  (-1.11 percent).

Analysis

The dramatic rise in the mortgage delinquency rates since the end of 2007 (the official beginning of the current recession) highlights a worthwhile comparison to our last recession. The 2001 recession, beginning in March of 2001 and ending in November of the same year, resulted from a collapse in the dot com bubble combined with the terrorist attacks of September 11th. During that time, the mortgage delinquency ratio increased by almost 28 percent. While considered a large increase at the time, in comparison to the delinquency impact of the current recession it might be viewed as modest. This time around the national average mortgage delinquency rate has increased by almost 79 percent to date—essentially tripling what occurred in the last recession.

“Unfortunately, the mortgage sector continues to experience increases in the delinquency rate due to worsening economic conditions in both the labor and financial markets,” said Keith Carson, a senior consultant in TransUnion’s financial services group. “The fourth quarter of 2008 showed not only an increase in the nation’s unemployment rate and declines in both home prices and per capita disposable income, but a downward slide in consumer confidence. As a result, home ownership continues to deteriorate in a credit market that has shown little signs of thawing even for the most credit worthy consumers.”

Forecast

“Our forecasting models for the mortgage sector show a decrease in nonpayment behavior as measured by the national 60-day mortgage delinquency rate. Although our national predictions were within 2 percent of the actual delinquency rate for year-end 2008, the economic outlook throughout 2009 has prompted significant revisions to our long term forecasts. These forecasts now show the 2009 mortgage delinquency rates reaching as high as 8 percent or more by year end,” said Carson. “Economic factors will continue to have a significant impact on the credit markets as unemployment increases and housing prices continue to erode. However, if government efforts to reduce mortgage rates are successful, there could be a gradual increase in home purchases, moving toward a stabilization of housing prices and a decrease in mortgage loan delinquencies in 2010.”

As far as state projections go, Florida is anticipated to continue to experience the highest delinquency rate through the end of 2009, with the possibility of doubling its current nonpayment rate of 9.5 percent. North Dakota is expected to continue to exhibit the lowest mortgage delinquency rate by year end, reaching just over 1.5 percent by the end of 2009.

TransUnion’s Trend Data database
The source of the underlying data used for this analysis is TransUnion’s Trend Data, a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion’s national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels.

About TransUnion
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion employs associates in more than 25 countries on five continents. www.transunion.com/business