Longer foreclosure timelines will keep the nation's mortgage delinquency rate above 5% next year, according to credit rating firm TransUnion.

The credit bureau says the national mortgage loan delinquency rate for 2012 is likely to come in at 5.32%.

While it is expected to decline slightly to 5.06% in the coming year, the projected 2013 rate reflects the ongoing trend of borrowers remaining in their homes longer, which creates longer-term delinquencies, TransUnion said.

"The slow improvement pace we are experiencing right now seems to be less about new borrowers not being able to make their payments and more about existing borrowers who have been delinquent for a very long time," said Tim Martin, vice president of U.S. housing for TransUnion's financial services business unit.

If TransUnion were to exclude borrowers who haven't made a mortgage payment in over a year, the national mortgage delinquency rate would plummet to 2.5%. With that in mind, analysts are wondering if today's higher delinquency rate reflects poorly on longer foreclosure timelines or if it means borrowers are obtaining time to save their properties. The general consensus is everything turns on a case-by-case basis.

"It's like everything else, there are always two sides," said Michael Woods, assistant vice president and managing attorney with default law firm Potestivo & Associates in Michigan. "One person may say the delinquency rate is above 5% and that is too high," he added. On the other hand, others may say the facts behind the numbers are more crucial. Are long-term delinquent borrowers getting a shot at saving their homes and maybe saving local property values via mediation programs and foreclosure regulations, or do the longer periods delay the inevitable?

Doug Duncan, chief economist for Fannie Mae, says seriously delinquent loans remain high in states with judicial foreclosures, while many nonjudicial foreclosure states are already seeing real estate recoveries. The steepest delinquency rate declines for 2013 are expected to occur in the recovering states of Nevada (18.62% drop in late payments); Minnesota (-13.58%); California (-12.4%) and Arizona (-11.61%), according to TransUnion.

"For the overall health of the housing market, the more rapidly the distressed property is eliminated, the healthier the market will be," he added.

Duncan said he recognizes the possibility that longer timelines and new rules give some distressed borrowers time to recover. But he said, when a borrower is unable to recover within a reasonable period of time, "one wonders if they are not qualified for any of the government housing programs and whether the longer time frame will help them get into one of the programs."

kpanchuk@housingwire.com