TransUnion's mortgage delinquency report
is projecting 33 states to have delinquency rates lower than 2.5% by the end of next year. And while the United States overall is expected to see a nearly 20% decline next year in its mortgage delinquency rate, 12 states are projected to have 30% or greater decreases. All but three states will either experience a decline or see their mortgage delinquency rates remain relatively flat over the course of 2015.
On an absolute percentage point basis, TransUnion forecasted the largest mortgage delinquency rate increses will happen in the following states:
- Idaho (up from 2.16% to 2.44%)
- Massachusetts (up from 3.18% to 3.26%)
- North Dakota (up from 0.97% to 1.02%).
The largest declines will happen in these states:
- Nevada (down from 4.65% to 2.97%)
- Georgia (down from 3.31% to 1.92%)
- Maryland (down from 4.17% to 2.83%)
- Illinois (down from 3.37% to 2.17%).
Nationally, the mortgage delinquency rate (the ratio of borrowers 60 or more days past due) is projected to decline to 3.12% to close 2014, and reach 2.51% by the end of 2015. That would end next year at the lowest level since hitting 2.61% in Q3 2007, prior to the Great Recession. As of Q3 2014, the mortgage delinquency rate stands at 3.36%.
National mortgage delinquency peaked at 6.93% in Q1 2010. Since that peak, the delinquency rate has dropped almost every quarter, with minor bumps occurring in Q3 and Q4 2011.
"We expect the national mortgage loan delinquency rate to continue its decline throughout 2015, marking four consecutive years of quarterly decreases," said Steve Chaouki, head of financial services for TransUnion. "We anticipate interest rates to remain relatively low next year and unemployment rates to continue their decline, both of which should help fuel home sales and improve consumers' ability to pay."
Foreclosures are also expected to continue to funnel through the legal system in 2015, which will reduce delinquencies that have been lingering for some time, according to TransUnion. All of these factors will contribute to a further decline in mortgage delinquencies."
"While we project that delinquencies will approach prerecession levels, it should be noted that they will likely remain above the historic norm of 1 1/2 - 2%; mortgage delinquency was rising even before the official 'start' of the recession. It is also important to note that the housing environment is far different now than it was when we last observed rates this low," continued Chaouki. "Regulatory requirements and scrutiny, recent home value appreciation and consumers' prioritization of payments have all changed the landscape of consumer mortgage lending."
One illustration of those differences is in the percentage of mortgage loans held by subprime consumers. The last time mortgage delinquency rates were near 2.5% was in Q3 2007, when there were 62.4 million mortgage accounts on the books. Of those accounts, 10.3% (6.4 million) belonged to subprime borrowers. Seven years later, there are nearly 10 million fewer mortgage accounts active overall; and of the 52.8 million mortgage accounts on record in Q3 2014, only 7.4% (3.9 million) are loans to subprime borrowers.
"Even though several years have passed since the mortgage crisis, mortgage lending remains relatively tight," said Chaouki. "In the last year alone (Q3 2013 to Q3 2014), we have recorded nearly one half million fewer subprime mortgage accounts than in the prior 12 months, even as the total number of mortgage accounts overall grew by about 500,000."
The mortgage delinquency rate is dropping nationally, but some states are predicted to have a significantly higher rate than others.