Homeowners who took on mortgages well after the housing bubble burst are doing a better job in keeping up with payments, a trend that has helped push the national rate of late payments on home loans to the lowest level in four years.
The percentage of mortgage holders at least two months behind on their payments fell in the fourth quarter to 5.19 percent from 6.01 percent a year earlier, credit reporting agency TransUnion said Tuesday.
The rate hasn't been that low since December 2008, a time when home prices were sliding, the U.S. economy was in recession and many adjustable-rate mortgages taken out by homebuyers with less-than-perfect credit were in the process of resetting to a higher rate.
Those ARM resets triggered higher payments that many borrowers couldn't afford, sending late payment rates higher into 2009. In addition, the national unemployment rate was on an upward trajectory in 2008 that would extend well into the following year.
Those are some of the reasons the mortgage delinquency rate didn't hit its peak of nearly 7 percent until the fourth quarter of 2009, according to TransUnion.
The rate has been trending down since then, aided by a rebound in home sales and rising home prices, which make it easier for borrowers to refinance their mortgages or sell their homes if they lose their jobs or otherwise become unable to make payments.
Home loans taken out in 2008 or earlier account for 60 percent of all U.S. mortgages, and they make up 90 percent of all mortgages that are at least two months late, said Tim Martin, group vice president of U.S. housing for TransUnion.
Many of those loans have gone unpaid for years, but delays in the foreclosure process, which in some states can take as long as three years, mean the mortgages remain unpaid.
"What's really going on is there're a lot of folks who have been delinquent for a very long time, and we're not really adding a lot of new people to the delinquency numbers," Martin said.
The number of mortgages gone unpaid two months or more climbed 54 percent in 2007 from the previous year, increased 53 percent in 2008 and rose 50 percent in 2009, according to TransUnion.
The decline has been far slower, with mortgage delinquency levels falling 7 percent in 2010 from the year before, 6 percent in 2011 and 14 percent last year, the firm said.
All told the 40 percent of all mortgages taken out by borrowers since 2009 only make up 10 percent of home loans that have gone unpaid.
That's partly due to lenders tightening the criteria needed to qualify for a loan, including larger down payments. And even with mortgage rates hovering near all-time lows, borrowers are typically getting fixed-rate, 30-year mortgages these days.
"That's had the effect that those borrowers are able to make their payments," Martin said.
That's kept the mortgage delinquency rate from creeping higher. Still, the trove of pre-2009 loans that are behind two months or more remain a considerable drag.
Even at a 4-year low, the mortgage delinquency rate is still well above the 1 percent to 2 percent average historical range, an indication that many homeowners still are struggling to make their payments.
Before the housing bust, mortgage delinquencies were running at less than 2 percent nationally.
TransUnion anticipates the national mortgage delinquency rate will continue declining through the end of March, though it expects the rate to remain above 5 percent.
At the state level, Florida led the nation in the fourth quarter with the highest mortgage delinquency rate of any state at 12.47 percent. It was followed by Nevada at 10.45 percent; New Jersey at 7.72 percent; and, Maryland at 6.88 percent.
The states with the lowest delinquency rate were North Dakota at 1.53 percent; South Dakota at 1.97 percent; Nebraska at 2.20 percent; and, Alaska at 2.20 percent.