Loan Defaults Plunge to Pre-Recession Levels

More home owners are keeping up with their mortgage payments. The nationwide mortgage loan delinquency rate — the number of borrowers 60 or more days past due on their mortgage — is projected to drop to 3.12 percent by the end of this year. By 2015, TransUnion researchers predict, the delinquency rate will reach 2.51 percent, the lowest level since reaching 2.61 percent in the third quarter of 2007, prior to the Great Recession.

Mortgage delinquencies peaked in the first quarter of 2010 at 6.93 percent. Since then, the delinquency rate has steadily been dropping.

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“We expect the national mortgage loan delinquency rate to continue its decline throughout 2015, marking four consecutive years of quarterly decreases,” says 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,” he continues. “All of these factors will contribute to a further decline in mortgage delinquencies.”

Nevertheless, TransUnion researchers project that while delinquencies will likely fall to precession levels, they likely will remain above the historic norm of 1.5 to 2 percent.  Delinquencies had started to rise prior to the recession.

TransUnion predicts that 33 states will have delinquency rates lower than 2.5 percent by the end of next year.

The largest mortgage delinquency rate drops likely will occur in Nevada (dropping from 4.65 percent to 2.97 percent); Georgia (falling from 3.31 percent to 1.92 percent); Maryland (falling from 4.17 percent to 2.83 percent); and Illinois (down from 3.37 percent to 2.17 percent), according to TransUnion’s report.

On the other hand, delinquency increases are projected to occur in only three states: Idaho (rising from 2.16 percent to 2.44 percent); Massachusetts (inching up from 3.18 percent to 3.26 percent) and North Dakota (up from 0.97 percent to 1.02 percent).

Source: TransUnion