TransUnion Housing Analysis Finds Mortgage Delinquency Rate More Closely Resembles Low Levels of 2003
CHICAGO, IL--(Marketwired - May 14, 2013) - A new TransUnion analysis found that stubbornly high mortgage delinquency rates may actually be as low as those observed 10 years ago when taking into account mortgages that have remained in the system for 180 days or more. This information was revealed today during a presentation at TransUnion's Financial Services Summit.
Earlier this month, TransUnion reported that the mortgage delinquency rate (i.e., the rate of borrowers 60 or more days past due) improved in Q1 2013 by 21% year over year, and 12% quarter over quarter. Although this is significant improvement, the mortgage delinquency rate currently stands at 4.56% in total and remains more than double the pre-crisis "norm." In contrast, credit card and auto loan delinquencies are both well below 1% and have been hovering near record lows since 2010.
TransUnion determined that, as of February, 2013, mortgages originated before 2009 make up 50% of all outstanding mortgages but 86% of all mortgage delinquencies. Since their origination, 20% of the mortgages originated in 2007 (the 2007 "vintage") have at one time or another been delinquent, and 14.5% within the first 3 years of origination. In contrast, only 2.5% of the mortgages in the 2010 vintage have experienced a delinquency within their first 3 years.
|Cumulative 60+ Mortgage Delinquency Rate; by Vintage|
|Time since Origination|
|Vintage||Year 1||Year 2||Year 3||Year 4||Year 5||Year 6|
"Some people may see the high overall mortgage delinquency number and worry that mortgage borrowers are still a bad credit risk; but we don't believe that's the right conclusion," said Tim Martin, group vice president of U.S. Housing in TransUnion's financial services business unit. "The newer vintages are performing quite well, and even the older vintages, at one time deteriorating quickly, are now contributing new delinquent borrowers at rates nearly identical to the good-performing newer mortgages."
TransUnion also found that the number of days a mortgage is reported to its credit database as delinquent before it either becomes current again (i.e., "cures") or is foreclosed has increased dramatically when comparing a snapshot of mortgage loans in 2007 and 2013.
|# of Days Mortgage Reported Delinquent Until Cure or Foreclosure|
|Age of Mortgage Loan||Back in 2007||Today / 2013|
|5 Years Old||304 days||541 days|
|4 Years Old||283 days||518 days|
|3 Years Old||257 days||417 days|
|2 Years Old||211 days||308 days|
|1 Year Old||152 days||216 days|
|Current Vintage||83 days||123 days|
Avg through 5 Years Old
To model the impact of the increasing Cure or Foreclose timeline on delinquency rates, TransUnion adjusted the calculation of mortgage delinquency to exclude those borrowers who are more than 180 days past due on their mortgage payment and the analysis concluded that the mortgage delinquency rate would have peaked in 2009 at about 3.05% (versus the actual peak of 6.89%) and would currently stand at approximately 1.68% (versus the actual Q1 2013 rate of 4.56%). The last time the mortgage delinquency rate was lower than 1.68% occurred in the second quarter of 2003 (1.67%).
"It's no longer a credit quality or home price depreciation issue, and we are not adding many new delinquent mortgage borrowers into the pool these days," said Martin. "Instead, it's an issue of the timelines to cure or foreclose. We are simply not draining the pool very fast; and the size of the 'drain' varies significantly by state."
TransUnion conducted this analysis at the state level for select states based on their individual Cure or Foreclose timelines. Not coincidentally, TransUnion found that states with longer delays in their Cure or Foreclose timeline over the last few years would experience the largest improvement in mortgage delinquency rate if they were to tighten their timeline back to 180 days. For example, in Q3 2013 New York would improve from 5.48% (actual) to about 1.64%, Florida would improve from 11.00% (actual) to about 2.21%, and Illinois would improve from 5.32% (actual) to about 1.78%.
"With house prices up, interest rates low and some of the mortgage servicing 'rules' getting set, it appears that delinquent borrowers are finally working themselves through the system, one way or another," said Martin. "Our analysis shows that if we were at more traditional Cure of Foreclose timelines, then we could already be reporting mortgage delinquency rates as being back to 'normal.'"
About the TransUnion analysis
This mortgage delinquency analysis included anonymous / de-personalized data only and covered approximately 52 million unique mortgages in the U.S. worth $7.8 trillion, which constitutes the full universe of first mortgages and home equity mortgages reported to TransUnion. The data reflect information reported to the TransUnion credit database through February, 2013.
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 reaches businesses and consumers in 33 countries around the world on five continents. www.transunion.com/business