Mortgage Delinquency Rate Rises For First Time Since 2009

There was more evidence today the housing market is far from being out of the woods. The national mortgage delinquency rate - the rate of borrowers 60 or more days past due - increased for the first time since the end of 2009, edging upward to 5.88 percent at the end of the third quarter, according to TransUnion.

The credit reporting agency issues a series of reports on credit-active consumers that track how they are managing mortgages, credit cards and auto loans.

"Until this quarter, we had seen six straight quarters where progressively more people were able to make their mortgage payments on time. We expected that trend to continue given recent, relatively more conservative lending policies and the apparent stabilization of both home values and unemployment," said Tim Martin, group vice president of U.S. Housing in TransUnion's financial services business unit.

"However, in the third quarter, the consumer was hit with several unanticipated shocks, including the U.S. credit rating downgrade, stock price declines, European debt concerns, stubbornly high unemployment, more downward pressure on home values and low consumer confidence. All of this affects a borrower's net worth and desire, or ability, to continue making house payments -- especially if they are facing negative equity in their homes due to price depreciation."

Loss of income

An anemic economy, however, may be a bigger reason. As homeowners continue to lose jobs, they tend to fall behind on the credit obligations.

“I lost my job 2 years ago,” Melissa, of Statesboro, Ga., told ConsumerAffairs.com. “Immediately after filing unemployment we contacted Bank of America to let them know and to see if there was any type of assistance. After several months of getting the run around, we were told that we did indeed qualify for loan modification and that the papers were in the mail. We never recieved the paperwork and by the time I started working again part time, they said I was making too much money and could not get assistance. We were already seven months behind at that point, then it moved into foreclosure process.”

A loss of income also caused Rich, of Oklahoma City, Okla., to fall behind on his mortgage last month.

“I called Vanderbilt (Mortgage) today about my payment that will be behind a month and 15 days on the 31st of October,” Rich said at the end of last month. “They told me that I either make a payment by that date or they will cancel all extensions and the full amount will be due.”

National trend

These stories have been repeated nationwide. According to TransUnion, between between the second and third quarters of 2011, all but 10 states and the District of Columbia experienced increases in their mortgage delinquency rates.

The nation's cities have been particularly hard hit. Sixty-four percent of metropolitan areas saw increases in their mortgage delinquency rates in the third quarter.

TransUnion says it's a significant difference compared to the second quarter of 2011 when only 21 percent of metropolitan statistical areas (MSA) experienced a rise. In the first quarter of 2011, 32 percent of MSAs experienced an increase.

This could be bad news for the real estate industry, which has begged the mortgage industry to loosen it's ever-tightening lending standards a bit. Statistics showing borrowers having a difficult time repaying loans isn't likely to inspire banker confidence.

TransUnion, meanwhile, believes the increase in delinquency is not a long-term trend. After a quarter or two, the company said it expects the delinquency rate to drift lower again in 2012.