Delinquency rate drop expected to slow in 2014

by Ryan Smith13 Dec 2013
The mortgage delinquency rate is expected to continue to drop in 2014, but at the lowest rate in the last five years.

Credit analytics firm TransUnion projects that the national mortgage delinquency rate will decline from 3.94% to 3.75% by the end of 2014, according to a report released Thursday. That’s only a 4.82% decline, reversing the trend of accelerating delinquency rate declines seen over the last few years. The delinquency rate declined by 15.05% in 2012 and is projected to decline by 23.43% by the end of 2013.

“TransUnion expects the national mortgage delinquency rate to continue its downward trend, though we see a few obstacles in 2014 that will limit the decline and keep it well above ‘normal’ levels,” said Tim Martin, group vice president of U.S. housing in TransUnion's financial services business unit. “The primary reason for the slowdown will be the pending rise in interest rates, which may hinder home sales while also blocking refinancing as an exit strategy for some mortgage borrowers. Additionally, foreclosure timelines continue to expand in many states, keeping longer vintage delinquencies in the system.”

Most states saw the delinquency rate peak in late 2009 or early 2010, with the national rate hitting a high of 6.93% in the first quarter of 2010. Since then, overall mortgage delinquencies have dropped nearly 41%, according to TransUnion.

The company projects the largest declines in delinquency rates to happen in Nevada, Florida, Georgia, Michigan and New Jersey.

“We are encouraged to see states hurt most by the mortgage crisis continue to lead the way in improvement, though there appears to be a shift with Nevada and Florida replacing California and Arizona as the states expected to see the biggest improvements in 2014,” said Martin. “These four states played a major role in elevating the U.S. mortgage delinquency rate by more than 200% between 2007 and the start of 2010. While Arizona and California now have mortgage delinquency rates well below the national average, Florida and Nevada remain at elevated levels but, as such, should show above average improvement next year.”


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