Mortgage Delinquencies Rise 53% in 2008: Report

Mortgage loan delinquency increased for the eighth straight quarter, hitting a national average high of 4.58 percent for the fourth quarter of 2008, according to a report released Tuesday by TransUnion. Traditionally seen as a precursor to foreclosures, this statistic is up almost 16 percent from the previous quarter’s 3.96 percent average and up a whopping 53 percent from the same period last year. “Unfortunately, the mortgage sector continues to experience increases in the delinquency rate due to worsening economic conditions in both the labor and financial markets,” said Keith Carson, a senior consultant in TransUnion’s financial services group. Mortgage borrower delinquency rates in the fourth quarter of 2008 were highest in Florida and Nevada, sitting at 9.52 percent and 9.01 percent, respectively. The lowest mortgage delinquency rates were found in North Dakota, at 1.21 percent, and Alaska, at 1.74 percent. The three areas showing the greatest percentage growth in delinquency from the previous quarter were Arizona, Montana and South Dakota. The average national mortgage debt per borrower rose a slight 0.26 percent to $192,789 from the previous quarter’s $192,287. On a year-over-year basis, the fourth quarter 2008 average represents a 0.74 percent increase compared to the fourth quarter 2007 average of $191,370. For the year, the area with the highest average mortgage debt per borrower was California at $356,421, followed by the District of Columbia at $354,082 and Hawaii at $310,289. The lowest average mortgage debt per borrower was in West Virginia at $96,242. The dramatic rise in the mortgage delinquency rates since the end of 2007 — the official beginning of the current recession — highlights a worthwhile comparison to our last recession, said TransUnion analysts. The 2001 recession, beginning in March of 2001 and ending in November of the same year, resulted from a collapse in the dot com bubble, combined with the terrorist attacks of September 11th. During that time, the mortgage delinquency ratio increased by almost 28 percent, according to TransUnion’s figues. While considered a large increase at the time, in comparison to the delinquency impact of the current recession it might be viewed as modest. This time around the national average mortgage delinquency rate has increased by almost 79 percent to date–essentially tripling what occurred in the last recession. TransUnion’s most recent forecasts show the 2009 mortgage delinquency rates reaching as high as 8 percent or more by year end, said Carson. “Economic factors will continue to have a significant impact on the credit markets as unemployment increases and housing prices continue to erode. However, if government efforts to reduce mortgage rates are successful, there could be a gradual increase in home purchases, moving toward a stabilization of housing prices and a decrease in mortgage loan delinquencies in 2010.” As far as state projections go, TransUnion said Florida is anticipated to continue to experience the highest delinquency rate through the end of 2009, with the possibility of doubling its current nonpayment rate of 9.5 percent. North Dakota is expected to continue to exhibit the lowest mortgage delinquency rate by year end, reaching just over 1.5 percent by the end of 2009. Write to Kelly Curran at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.