Delinquency Rate for Home Loans Slows Down

Published by nora | Filed under Buyer / Seller Tips, Communities, Market Trends, Mortgage / Finance, Real Estate

The drop in the national default rate for home loans in the second quarter is one sign that the housing sector is starting to stabilize. According to credit bureau TransUnion, which analyzes quarterly mortgage, credit card and auto loan data in about 27 million credit files or 10 percent of active consumer files in the U.S., the percentage of home loans delinquent by two months or more in the second quarter dropped to 6.67 percent, a decrease of 1.48 percent from the default rate of 6.77 percent in the first quarter.

The default rate in the first quarter also marked a decrease from the prior quarter, and it was even more substantial as the percent of decrease was 18.52 percent. However, the default rate in the second quarter was still higher than the rate in the same quarter in 2009, which was 5.81 percent.

What is even more encouraging is the drop in the rate of home loans defaulting by 90 days or more or by 120 days or more for the first time since 2007, the year the recession started. TransUnion said that 64 percent of all large metro areas in the U.S. posted a drop in home loans delinquent by 90 days, marking a substantial increase from 45 percent of large metro areas in the previous quarter. Similarly, the percentage of large metro areas posting a drop in home loans in default by 120 days almost doubled from the previous quarter.

The average mortgage debt nationwide also decreased in the second quarter, with the average home loan per borrower dropping to $191,284 from $192,774 in the previous quarter and from $193,811 in the same quarter in 2009. Areas with the highest average mortgage debt per borrower were:

• Washington, D.C. at $366,627
• California at $345,502
• Hawaii at $311,130

The state with the lowest average mortgage debt was West Virginia at $99,206. States which showed the biggest percentage drop in average mortgage debt were:

• Nevada at 31.2 percent
• Arizona at 3 percent
• Florida at 1.8 percent

Along with the drop in the national default rate and average mortgage debt was the drop in the origination of home loans nationwide by 50 percent. Idaho and Wisconsin posted the sharpest drops, which were 58.7 percent and 58.6 percent, respectively.

Default rates continued to be highest in the states of Nevada, with a delinquency rate of 15.86 percent, and Florida with 15.02 percent. North Dakota, South Dakota and Nebraska posted the lowest default rates of 1.61 percent, 2.23 percent, and 2.61 percent, respectively.

TransUnion analysts expect delinquency rates for home loans to continue dropping for the rest of the year, as the employment situation and real estate values improve. They expect the national default rate to drop to 6.4 percent towards the end of the year.