Good news for the mortgage origination and secondary markets: A recent report published by credit bureau TransUnion indicates that the national home loan delinquency rate has vastly improved over the last few months. In fact, the ability of American borrowers to get back to making timely mortgage payments is the best TransUnion has seen in nearly 20 years.
Although most lenders consider mortgage payments to be late anytime they are not received on the date agreed upon between originators and borrowers at closing, they should not be losing sleep until 30 days have passed without a payment. The national delinquency rate is calculated by taking into account those payments that are still past due after 60 days. Serious delinquency begins after the payment is over 90 days past due.
On a quarterly basis, TransUnion estimates that mortgage delinquency in the United States improved by 5.19 percent in the final quarter of 2012 and by 4.56 percent in the first quarter of 2013. The situation really improves when the data is analyzed on a year-over-year basis. In the 12 months preceding March 2013, mortgage delinquencies were reduced by 21.11 percent in the U.S.
Moving Towards a Normalized Delinquency Rate
Mortgage delinquencies are the bane of lenders, servicers and investors who rely on a constant stream of monthly payments to sustain their lucrative financial activities. Some level of missed or late payments is always expected, and under normal conditions the U.S. housing market should not run above the two percent mark. The current 4.59 national mortgage delinquency rate may seem far from the desired two percent, but the vast improvement is better appreciated when stopping to consider that the rate was once at seven percent in late 2009.
There are several signs that support the idea of American borrowers moving closer to a normalized housing market with regard to monthly mortgage payments. The proof can be observed in states such as Florida, where the collapse of the housing market brought about disastrous consequences. The Sunshine State is currently the worst-performing in terms of timely mortgage payments with an 11 percent rate of delinquency, but the situation has improved by more than 20 percent in the last 12 months.
Nevada, New Jersey and Delaware are also still deeply affected by mortgage delinquency with respective rates of 9.2, 6.93 and 6.27 percent. Still, states where mortgage delinquency is currently at two percent or less include Alaska, Nebraska and the Dakotas.