Mortgage Delinquency Rate Drops to Five-Year Low

Last year saw less homeowners falling behind on their mortgages than in recent years as the national delinquency rate fell below 4% for the first time since 2008, according to a new report.

 national mortgage delinquency rate dropped below 4% for the first time since 2008, according to a recent report.

The mortgage delinquency rate ended the fourth quarter of 2013 at 3.85%, notes credit information services firm TransUnion in its proprietary Industry Insights Report.

This was the eight consecutive quarter that saw the delinquency rate decline, while also falling more than 24% from one year earlier when it was 5.08% in the fourth quarter of 2012.

“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, in a statement.

TransUnion compiles its Industry Insights Report using anonymized credit data from credit-active consumers in the United States.

On a national level, all 50 states and the District of Columbia posted declines in their mortgage delinquency rates year-over-year by the end of the fourth quarter. 

Only New Jersey and New York did not have double-digit percentage declines in their respective delinquency rates, noted TransUnion.

The fourth quarter of 2013 also recorded fewer mortgage accounts than it did a year ago with 52.84 million accounts, down from 53.85 million in 2012. 

“New account originations have declined significantly in recent quarters,” Chaouki said. “This is primarily related to recent spikes in interest rates, particularly in the refinance market. Additionall, continuing tight lending standards remain a factor in some sectors of the market.”

Looking forward, TransUnion forecasts that the mortgage delinquency rate will continue its downward trend this year, with delinquencies falling to 3.70% by the end of March.

“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 seven to 10 years ago,” stated Chaouki.

Additionally, as older mortgages exit the system, Chaouki suggests the industry will experience continued declines in overall mortgage delinquencies. 

Written by Jason Oliva

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