Past-Due Mortgages Up for First Time Since 2009: Report

The national mortgage delinquency rate edged up during the third quarter of 2011, marking the first increase in nearly two years, according to ""TransUnion"":http://www.transunion.com.

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The Chicago-based credit bureau calculates the mortgage delinquency rate as the percentage of borrowers 60 or more days behind on their payments, excluding those that are already in foreclosure. The rate increased to 5.88 percent as of the end of the third quarter.

TransUnion's latest assessment follows a ""second-quarter report"":http://dsnews.comarticles/national-delinquencies-register-greatest-drop-since-recession-end-2011-08-15 in which the company recorded the largest percentage drop in mortgage delinquencies since the end of the recession two years earlier. The Q2 delinquency reading was 5.82 percent.

""Until this quarter, we had seen six straight quarters where progressively more people were able to make their mortgage payments on time,"" said Tim Martin, group VP of U.S. housing in TransUnion's financial services business unit.

Martin expects the sudden upward movement in mortgage delinquencies to be a temporary one, and the trend of increasing on-time payments that began at the end of 2009 to continue. He bases this assumption on the conservative lending policies of late and what he describes as ""the apparent stabilization of both home values and unemployment.""

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Martin notes that in the third quarter, the consumer was hit with several unanticipated shocks, including the U.S. credit rating downgrade, stock price declines, European debt concerns, stubbornly high unemployment, more downward pressure on home values, and low consumer confidence.

""All of this affects a borrower's net worth and desire, or ability, to continue making house payments -- especially if they are facing negative equity in their homes due to price depreciation,"" Martin said.

Between the second and third quarters of 2011, 40 states experienced increases in their mortgage delinquency rates. On a more granular level, 64 percent of major metropolitan areas saw mortgage delinquencies rise. TransUnion says the third-quarter results diverged widely from the previous quarter, when only 21 percent of metropolitan statistical areas reported an increase.

TransUnion's forecast predicts mortgage borrower delinquency rates to drift downward in 2012. However in the short run, the company says the industry may see a quarter or two of slightly elevated nonpayment rates as some consumers are not able to, or decide not to, repay their mortgage debt obligations in light of the uncertain economic outlook.

TransUnion's forecast is based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates, and real estate values. The company says the forecast would change if there are unanticipated shocks to the economy affecting recovery in the housing market or if home prices fall more than expected.

Tuesday’s report from TransUnion is part of its ongoing series of quarterly analyses of credit-active U.S. consumers and how they are managing credit related to mortgages, credit cards, and auto loans. The company’s findings are based on the credit performance detailed in 27 million consumer records, randomly sampled every quarter from TransUnion's national credit database.