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Late Mortgage Payment Rate Continues to Decline

The housing and job markets are still weak, but homeowners are slowly gaining strength.

Mortgage
CNBC.com
Mortgage

The percentage of late-paying mortgage holders—those who were 60 days or more late with payment—decreased in the spring for the sixth straight quarter, according to credit reporting agency TransUnion.

The rate fell to 5.82 percent compared with 6.67 percent a year ago. It peaked at 6.9 percent in the fourth quarter of 2009.

The drop reflects stricter lending policies at banks, said Tim Martin, who watches the housing market for TransUnion's financial services business unit. Since banks are more cautious about ending only to customers with higher credit scores, new homeowners are less likely to default on their mortgages, he explained.

"Newer vintages of mortgages are performing better and becoming a bigger portion of outstanding mortgage universe," he said. On older mortgages, the number of borrower who lost their jobs or had mortgage payments that adjusted beyond their ability to pay are on the downswing.

TransUnion's research is culled from its database of 27 million anonymous consumer records.

Martin noted that the late payment rate fell in 49 states since the first quarter of this year, with only Vermont seeing a delinquency increase, but the rate in the Green Mountain state is just 2.98 percent, far lower than the national average.

The states with the highest delinquency rate remain Florida at 13.91 percent; Nevada at 13.04 percent; California at 7.83 percent, and Arizona at 7.78 percent. These four states were hit the hardest by the housing market collapse.

A report out Thursday from foreclosure listing firm RealtyTrac showed that Nevada lead the nation in foreclosures in July, with one in every 115 households receiving a foreclosure notice. California and Arizona were second and third in foreclosures for the month, with Florida sixth. Such notices are sent out after a homeowner falls several months behind on their payments.

TransUnion said the state with the lowest delinquency rate remained North Dakota at 1.45 percent. South Dakota at 2.31 percent, Nebraska at 2.43 percent and Alaska at 2.64 percent round out the states least likely to have late payments.

The company forecast that the delinquency rate will continue to down drop for the rest of the year, ending 2011 just above 5 percent.

The current rate is nearly three times the pre-recession norm, and at the current pace of improvement, it will likely be the end of 2015 before the rate has dropped back down, Martin said.

"It took three calendar years for delinquencies to run up to their peak," he said. "We're one-and-a-half years since that peak, and we've recovered about 22 percent. It's taking longer to come down than it did to go up."