Delinquency hits lowest rate since 2008, but originations are also down

by Ryan Smith12 Feb 2014
The national mortgage delinquency rate has dropped to its lowest level since 2008, according to data released today.

The rate of borrowers 60 days or more delinquent on their mortgages dropped to 3.85% in the fourth quarter, according to credit reporting agency TransUnion. That’s the first time the delinquency rate has dropped below 4% since 2008, and the eighth consecutive quarter in which the rate has declined.

All 50 states saw delinquencies decline between Q4 of 2012 and Q4 of 2103, and only two – New York and New Jersey – failed to post double-digit declines, according to TransUnion.

“It's encouraging to see the mortgage delinquency rate drop for two consecutive years, but at the same time, mortgage delinquencies continue to be twice as high as levels observed prior to the housing bubble,” said Steve Chaouki, head of financial services for TransUnion. “The housing market also still shows some volatility, with both housing prices and originations dropping in the latter part of 2013 after experiencing improvements in the first part of the year.”

There were 52.84 million mortgage accounts in the U.S. as of Q4 2013, according to TransUnion. That’s down from 53.85 million in Q4 2012, and 10 million fewer accounts than during the same period in 2008.

“New account originations have declined significantly in recent quarters,” Chaouki said. “This is primarily related to recent spikes in interest rates, particularly in the refinance market. Additionally, continuing tight lending standards remain a factor in some sectors of the market.”

New originations dropped from 2.29 million in the third quarter of 2012 to 1.95 million in the third quarter of 2013, according to TransUnion. Non-prime borrowers did see an increase in their shair of originations, up to 6.61% from 5.55% during Q3 2012. That’s still well below the non-prime share of 16.26% in 2007.

“Mortgage loans originated in the last few years have significantly higher credit quality than those originated prior to the recession, with delinquency rates that resemble those seen seven to 10 years ago,” Chaouki said. “As older mortgages continue to slowly exit the system, the industry will experience continued declines in mortgage overall delinquencies.”