Late mortgage payments spike in 2Q vs. year ago

[August 17, 2010]  NEW YORK (AP) -- The rate at which U.S. homeowners fell behind on their mortgage payments remained stubbornly elevated in the second quarter.

In the three months ended June 30, the number of mortgage holders 60 days or more behind on their payments was 6.67 percent, credit reporting agency TransUnion said Tuesday. That's a big jump from 5.81 percent in the second quarter of last year, and well above the historical norm of 1.5 percent to 2 percent.

One positive sign is that the statistic reveals a slower rate of increase from the pace seen a year ago.

What's more, it marks a marginal improvement from the rate of 6.77 percent recorded during the first three months of the year. It's also below the 6.89 percent record reached in the fourth quarter of 2009.

"We're seeing signs of recovering in terms of delinquency," said FJ Guarrera, vice president in TransUnion's financial services unit.

TransUnion uses a 60-day delinquency rate as a warning sign of potential foreclosure. That's because it would be difficult for homeowners having financial problems to make up two payments to bring their account current.

The data comes days after foreclosure listing firm RealtyTrac Inc. said the number of U.S. homes lost to foreclosure in July surged 6 percent from last year. That jump indicates that more banks stepped up repossessions to clear out their backlog of bad loans.

"A lot of foreclosures continue to work their way through the system," Guarrera said. Although the delinquency data does look back a few months, it shows a slight improvement that could indicate foreclosures will start to slow, he said.

Witness to that there were 12 states that showed increased delinquency rates in the second quarter, whereas a year ago the figure worsened in nearly every state, Guarrera said.

Driving up the national rate are the four states hardest hit by the foreclosure crisis: Nevada, Florida, Arizona and California. In each of these, the rate is above 10 percent, with Nevada leading at 15.86 percent, compared to 13.8 percent a year ago. In Florida, the delinquency rate rose to 15 percent, from 12.3 percent last year.

The rates in Georgia, New Jersey, Maryland and Illinois are also above the national average.

North and South Dakota remain at the low end for the nation, at 1.61 percent and 2.23 percent, respectively.

TransUnion uses a sample of about 10 percent of its database of 270 million consumer credit reports to produce the statistics.

The figures point toward a very slow recovery. TransUnion expects the delinquency rate to drift down for the rest of the year, nearing 6.4 percent nationally by the end of 2010.

Some states, however, have more trouble ahead.

• Arizona: The delinquency rate will likely hover between 9.5 percent and 10 percent for the next four quarters, and is forecast to start dipping in mid-2011.

• California: The worst may be behind it. TransUnion expects the delinquency rate to stay close to its current level through the end 2010 and then show a steady decrease.

• Florida: Its delinquency rate could hit 16.2 percent by year end, but TransUnion expects late payments to start declining there in 2011.

• Georgia: There are signs of further trouble, the state now has the fifth-highest delinquency rate at 7.69 percent.

• Nevada: The rate is expected to start falling by the end of this year, but remain above 10 percent through 2012.

"We're seeing that where things were bad, they continue to be bad," Guarrera said.

The data shows a stronger correlation between delinquency and falling property values than between delinquency and unemployment.

"There is certainly a statistically relevant correlation when we look at unemployment," Guarrera noted. "But home values are a greater driver."

[Associated Press; By EILEEN AJ CONNELLY]

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