Smart Borrower Blog

Mortgage Delinquencies Fall for 9th Straight Quarter


May 28th, 2014 @ 7:23 PM by Amber Nelson


The percentage of U.S. homeowners behind on their mortgages fell in the first quarter of this year, creating a nine quarter streak of declining delinquency rates, a sign that the mortgage market has shaped up since the housing bubble burst.

The national mortgage delinquency rate – the percentage of borrowers who are 60 days or more late on their loans – fell to 3.61 percent at the end of the 2014 first quarter, according to data from credit reporting agency TransUnion, down from 3.81 percent the previous quarter and down 24 percent from the year before when it was still as high as 4.76 percent. The rate is the lowest it has been since the second quarter of 2008.

The drop in delinquency rates was felt across all 50 states and the District of Columbia on a yearly basis. The states that saw the most dramatic decreases were areas where the housing downturn had previously been the worst. Arizona experienced a 37.8 percent year-over-year decline, California followed with a 36.9 percent fall and Nevada had its rate drop 34.0 percent from the first quarter of 2013.

“It’s encouraging to see mortgage delinquencies drop once again, especially during a period when mortgage originations slowed considerably,” said Steve Chaouki, head of financial services for TransUnion in a press release. “This trend in improved performance is driven in part by lenders working their way through the foreclosure backlog, along with continued conservatism in underwriting new mortgages.”

Even though mortgage standards are generally much tighter now than during the housing boom, there has been an interesting rise mortgage originations among non-prime borrowers – those with credit scores below 700 – typically a sign of looser lending criteria. In the fourth quarter of last year, nonprime borrowers made up 7.21 percent of all new mortgage loans, up from just 4.98 percent the year before. TransUnion pointed out that the current level is still nowhere close to the 15.97 percent from the end of the housing boom in the last quarter of 2007.

Said Chaouki, “Non-prime borrowers are taking a larger share of new originations. We have not seen this in quite some time. Even so, mortgage underwriting remains conservative relative to the other primary credit products in the marketplace.”

 

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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