TransUnion announced Wednesday that last quarter’s mortgage delinquency rate dropped below 4 percent for the first time since 2008. The rate represents borrowers who are 60 days or more delinquent on their mortgage.
The Q4 2013 rate of 3.85 percent is a 24.2 percent year-over-year change from the Q4 2012 rate of 5.08 percent.
Mortgage delinquency rates have been steadily drifting downward; Q4 2013 is the eighth consecutive quarter of decline.
The mortgage delinquency rate is based on data gathered from TransUnion’s proprietary Industry Insights Report, a quarterly overview summarizing data, trends, and perspectives on the U.S. consumer lending industry. The report is based on anonymized credit data from virtually every credit-active consumer in the United States.
However, TransUnion officials are cautious to put their recent report in perspective.
“It’s encouraging to see the mortgage delinquency rate drop for two consecutive years, but at the same time, mortgage delinquencies continue to be twice as high as levels observed prior to the housing bubble,” said Steve Chaouki, head of financial services for TransUnion. “The housing market also still shows some volatility, with both housing prices and originations dropping in the latter part of 2013 after experiencing improvements in the first part of the year.”
All individual states experienced a decline in delinquency rates, and some areas fared better than others.
The largest year-over-year changes in state rates occurred out West. Nevada, California, and Arizona showed the largest percentage changes from 2012.
Nevada’s delinquency rates went from 9.98 percent to 6.52 percent, a change of 34.7 percent. California moved from 4.92 percent to 3.06 percent, a shift of 37.8 percent.
Arizona represented the largest drop in mortgage delinquency rates, plunging 38.6 percent in one year from 5.11 percent to 3.14 percent in Q4 2013.
Chaouki noted a few reasons for the declining rate of mortgage delinquency.
“Mortgage loans originated in the last few years have significantly higher credit quality than those originated prior to the recession, with delinquency rates that resemble those seen 7 to 10 years ago,” said Chaouki. “As older mortgages continue to slowly exit the system, the industry will experience continued declines in mortgage overall delinquencies.”
TransUnion forecasts that mortgage delinquencies will continue to fall into the first quarter of 2014, projecting a rate of 3.70 percent by the end of March.