Mortgages: Delinquency Rates on the Decline

As the economy improves, the number of borrowers who are seriously behind on their mortgage payments continues to decline. The enhanced outlook is such that even those in delinquency are feeling more optimistic about their circumstances and homeownership in general.

The share of borrowers delinquent by 60 days or more is down in all 50 states compared with a year ago, according to an analysis of 52 million mortgages by TransUnion, a credit information service.

The national delinquency rate, 4.09 percent, is down from 5.33 percent at this time last year, according to TransUnion. That is still well above the 1.5 to 2 percent delinquency rate that was the norm in the 1990s, before the housing bubble. But it marks the seventh consecutive quarter of improvement, said Tim Martin, TransUnion’s group vice president for domestic housing.

The largest year-over-year declines were in California, Arizona and Nevada, where rates fell 32 to 38 percent.

“They were some of the states that had the biggest run-ups,” Mr. Martin said. “They’re seeing high percentage decreases because they got so high to begin with.”

Although an expected rise in interest rates may hamper some delinquent borrowers’ ability to resolve their financial problems, delinquencies will most likely continue to fall in coming months as the problematic older loans work their way out of the system, he said.

Foreclosures are also down significantly nationwide. According to CoreLogic, a residential property information provider, completed foreclosures in September, at 51,000, numbered 39 percent fewer than in September 2012. The foreclosure inventory, which includes all homes in some stage of foreclosure, was down 33 percent, to 902,000 from 1.4 million homes.

Access to refinancing continues to be a significant problem for delinquent borrowers, according to the latest Fannie Mae National Housing Survey, a monthly snapshot of 1,000 consumers. Almost 30 percent of the delinquent borrowers surveyed said they had tried unsuccessfully to refinance in the last three years. (These were borrowers who were 60 days or more behind, but not in foreclosure.) Among those who said they had chosen not to refinance, the main obstacles were an inability to qualify or to obtain affordable terms.

The extent of the loan barriers may be overstated, in that “there’s some misperception among delinquent borrowers as to whether they can refinance,” said Steve Deggendorf, Fannie Mae’s director of strategic research. “They’re not always aware of HAMP,” he said, referring to the government’s Home Affordable Modification Program.

Still, these financial difficulties haven’t soured delinquent borrowers on homeownership. Some 67 percent agreed that a home purchase is a safe investment, which represents an increase over the last three years, when only 53 to 57 percent felt that way. It appears that the enthusiasm generated by the improving housing market and rise in home prices has trickled down to those struggling to pay their mortgages, Mr. Deggendorf said. The rebounding numbers make sense, he noted, given that previous Fannie Mae research has consistently shown lifestyle preferences and emotional ties as holding more sway over homeownership than financial concerns.

“Delinquent borrowers still have a very strong attachment to their home,” Mr. Deggendorf said, “and I think a lot of them want to preserve their homes because of all the lifestyle benefits they receive — shelter, security, safety. They’ve been through a bad time, yet they still have these ties to homeownership.”


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