Mortgage Delinquencies May Hit 17-Year High

The credit crunch has plagued much of 2008, and Ezra Becker, principal consultant for TransUnion Financial Services, expects credit conditions to continue to deteriorate in the new year.

“The biggest story is really with mortgages,” said Becker. His firm, which has a database of 27 million anonymous consumer records, projects delinquencies will reach their highest levels since 1992.

“The percentage of mortgage borrowers who are 60 days or more past due on their mortgages historically hovers right around two percent, and at the end of the third quarter of 2008, it had reached almost four percent,” he added.

Becker expects mortgage delinquencies to reach 4.7 percent at the end of 2008 and 7.17 percent by the end of 2009 – three-and-a-half times the historical norm.

The unemployment rate, consumer confidence levels and home values are among the statistics TransUnion uses to determine its projections. Becker said these projections could change if the government pursues another bailout or stimulus package.

Auto Loan Debt

“Auto loan debt at the end of the third quarter was about 80 basis points, and we expect it to hit 88 basis points by the end of this year,” Becker told CNBC.

By the end of 2009 he expects auto loan debt to rise above one percent for the first time since his company started tracking the number.

Credit Card Debt

When it comes to credit cards, Becker said lenders are managing risk appropriately and borrowers are performing better than they are with other types of debt.

“The proportion of credit card borrowers that are 90 days or more past due on their credit cards is hovering right around 1.09 percent, and we expect that to stay pretty constant through the end of the year and then rise to about 1.37 percent by the end of 2009.”

These numbers are within historical norms, and Becker said this is because consumers are starting to recognize the true nature of credit.

“Historically consumers have mistakenly looked at credit as an augmentation of their income, which is not correct,” he said. “With tough economic times consumers come to recognize the true nature of credit, which is really a tool for managing the disparity between the timing of your income versus your expenses.”