The number of consumers ""rolling"" their delinquency status on mortgage payments from 30 to 60 days past due and 60 to 90 days past due peaked in July 2009, according to a new study from ""TransUnion"":http://www.transunion.com.
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It's interesting to note that the National Bureau of Economic Research has declared the ""end of the nation's latest recession"":http://www.nber.org/cycles/sept2010.html to be June 2009, one month before the roll-rate crest.
Data released by the Chicago-based credit reporting agency this week shows that approximately 24 percent of consumers who were 30 days past due on their mortgage payments in June 2009 became 60 days past due in July 2009. Nearly 38 percent of consumers 60 days delinquent on their mortgage payments became 90 days late in that same time.
""Consumers who are past due on their mortgages are always susceptible to going into more severe stages of delinquency,"" noted FJ Guarrera, a VP in TransUnion's financial services business unit and one of the authors of the study. ""We found that this vulnerability was exacerbated during the recession as housing prices declined and unemployment increased.
Guarrera says the fact that mortgage delinquency roll rates reached their apex one month after the recession presumably subsided is a clear illustration of how credit dynamics can lag economic dynamics.
""[A]lthough we may have left the worst of the recession behind as we entered recovery economically, from a credit perspective we were just hitting the toughest period for consumer default,"" Guarrera said.
[COLUMN_BREAK]One of the interesting insights gained from the TransUnion study was the relationship between consumers with home equity loans or lines of credit and increased mortgage delinquency through the recession. The study indicated that the presence of one of these types of loans may contribute to higher roll rates during trying economic times.
In March 2006, the national 30-60 mortgage roll rate was 12.56 percent for borrowers with home equity loans or lines of credit and 17.16 percent for those without. However, by March 2009 the 30-60 roll rate had skyrocketed to 26.55 percent for borrowers with secondary home equity liens, while increasing to only 22.66 percent for those borrowers without.
Not surprisingly, the effect of home equity loans or lines of credit on roll rates was more pronounced in states with the most severe recessionary effects. In California during that same time period, 30-60 mortgage roll rates for borrowers with home equity loans jumped from 12.99 percent to 39.42 percent. California borrowers without home equity loans/lines experienced a smaller increase from 17.00 percent to 32.24 percent.
""This is yet another example of the dynamic nature of the lending markets, and how consumers react to different economic, financial, and social forces,"" Guarrera said. ""The presence of a home equity line used to be an indicator that a consumer had 'deeper pockets,' i.e. more equity and greater financial resources. Now it has become a red flag for higher risk due to over-leveraging.""
TransUnion's latest study also confirmed previous findings that mortgage delinquency roll rates were correlated to falling housing prices and rising unemployment over the course of the recession.
""Unemployment and home value depreciation were the two primary drivers of mortgage delinquency over the past three years, impacting both the ability and willingness of consumers to pay their monthly mortgage debt service,"" Guarrera said. ""In areas where these effects were more severe, we saw a more rapid progression through the levels of delinquency and into foreclosure. Conversely, states with relatively stable home prices and less severe unemployment saw roll rates near or below the national level.""