Mortgage Delinquencies to Rise, and Then Fall in 2012; Credit Card Delinquencies to Remain Steady

TransUnion released its annual forecasts today on consumer credit, which indicate that national mortgage loan delinquencies (the ratio of borrowers 60 or more days past due) will decline to about 5% by the end of 2012 from just under 6% at the conclusion of 2011. After six consecutive quarterly declines between Q4 2009 and Q2 2011, 60-day mortgage delinquencies are expected to rise through Q1 2012, peaking at 6.02%. TransUnion forecasts mortgage delinquencies, a statistic generally considered a precursor to foreclosure, to decline for the last three quarters of 2012.

“Although house prices and unemployment will likely face continued pressure next year, this forecast calls for gradual improvements in the second half of 2012 to other key variables, like improving credit quality of new originations, consumer confidence and GDP, that will positively influence homeowners’ ability and willingness to pay their mortgages,” said Tim Martin, group vice president of U.S. housing in TransUnion’s financial services business unit. “If things go as expected, there are no additional negative shocks to the U.S. economy and the average borrower’s situation, mortgage delinquencies could fall as much as 16% in 2012 compared to 2011.”

The expected mortgage delinquency decline in 2012 would follow recent yearly trends, including an expected 7% decrease by the end of this year and a 7% reduction in 2010. This is in contrast to more than 50% year-over-year increases between 2006 and 2009.