The nation's mortgage loan delinquency rate is expected to fall down to 2.51 percent by the end of 2015, its lowest level since prior to the housing bust, according to data released by TransUnion on Wednesday.
TransUnion predicted that the mortgage loan delinquency rate, which is the ratio of borrowers 60 or more days past due on mortgage payments, will drop to 3.12 percent by the end of 2014. The projected level of 2.51 percent for the end of 2015 would be the lowest level since Q3 2007's rate of 2.61 percent, according to TransUnion.
The national mortgage delinquency rate has declined almost every quarter since peaking at 6.93 percent in Q1 2010, according to TransUnion. The rate experienced minor increases in Q3 and Q4 2011. The mortgage delinquency rate stood at 3.36 percent for Q3 2014, TransUnion reported.
"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. All of these factors will contribute to a further decline in mortgage delinquencies."
One contributing factor to the steady decline in the number of mortgage delinquencies is the difference in the number of loans to subprime consumers, according to TransUnion. In Q3 2007, the last time the delinquency rate was around 2.5 percent, 10.3 percent of mortgage loans in the U.S. were to subprime borrowers (6.4 million subprime out of 62.4 million total mortgage loans). By comparison, in 2014, only 7.4 percent (3.9 million out of 52.8 million) of all mortgage loans in the U.S. were to subprime borrowers, according to TransUnion.
"Even though several years have passed since the mortgage crisis, mortgage lending remains relatively tight," Chaouki said. "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."
While state delinquency rates were generally in line with the national average that peaked in late 2009 to early 2010, TransUnion predicts that 33 states will have delinquency rates below 2.5 percent by the end of 2015. According to TransUnion's forecast, 12 states are projected to see a decrease of 30 percent or more in their delinquency rates next year, ahead of the national average of 20 percent for that time frame. TransUnion predicts declines or relatively steady delinquency rates throughout 2015 for all but three states, where increases are expected: Idaho (from 2.16 to 2.44 percent), Massachusetts (from 3.18 to 3.26 percent), and North Dakota (from 0.97 percent to 1.02 percent). The largest delinquency rate declines for 2015 are forecasted for Nevada (from 4.65 to 2.97 percent), Georgia (from 3.31 to 1.92 percent), Maryland (4.17 to 2.83 percent), and Illinois (3.37 to 2.17 percent), according to TransUnion.