Late mortgage payments up in 3Q, 1st rise in years

While lawmakers in Washington debated the debt ceiling and consumer confidence dropped, more homeowners in the U.S. were having a harder time making their mortgage payments.

While lawmakers in Washington debated the debt ceiling and consumer confidence dropped, more homeowners in the U.S. were having a harder time making their mortgage payments.

The rate that mortgage holders were late with their payments by 60 days or more rose in the June-to-September period for the first time since the last three months of 2009, according to TransUnion.

The credit reporting agency said 5.88 percent of homeowners missed two or more payments, an early sign of possible foreclosure. That was up from 5.82 percent in the second quarter of 2011.

The increase surprised TransUnion researchers, who previously forecast late payments, or delinquency, to fall for the quarter.

"It's much different than we've been talking about the last few quarters," said Tim Martin, group vice president of U.S. Housing in TransUnion's financial services business unit.

The problems were widespread. Between the second and third quarters, all but 10 states and the District of Columbia saw delinquency rates increase.

TransUnion's data is culled from 27 million credit reports, representing about 10 percent of all U.S. consumers who actively use some form of credit.

Martin could not pinpoint one particular reason for the jump. Normally, for instance, housing prices and unemployment have a big influence on delinquency. "Those are both still important, but neither has noticeably deteriorated," he said. In fact, unemployment was steady during the summer and the Standard & Poor's/Case-Shiller index showed small improvements in housing prices in most major cities during July and August.

That leaves wider economic issues having a larger role, Martin said. He pointed to the U.S. credit rating downgrade, the U.S. and European debt crises and the tanking U.S. stock markets during this period. And he noted that two different measures of consumer confidence — the Conference Board and the University of Michigan — both showed those issues hurt consumer attitudes.

That atmosphere "could make folks question paying their mortgage," he observed.

Martin said there's no real way to tell if some of the delinquency increase was driven by people who decided not to make payments because their homes are worth less than they owe on their mortgage. But it is notable that three of the 10 states that saw declines in late payments were among the hardest hit by the foreclosure crisis: Arizona, California and Nevada.

In fact, Arizona had the best rate of improvement in the nation, and now has a delinquency rate of 7.46 percent. That still places it fourth worst in the country, but the rate is vastly improved from where it stood. In the fourth quarter of 2009, Arizona's delinquency rate hit 16 percent, the highest for any state since the foreclosure crisis began.

Arizona does, however, still have the highest foreclosure rate in the nation — one in every 44 housing units with a foreclosure filing in the third quarter, according to Realtytrac.

Another possibility for the bump in the delinquency rate is that a new crop of adjustable mortgages written toward the end of the housing bubble is resetting. Even if their interest rates remain low after the adjustment, the payments might have increased, said Darren Blomquist, a Realtytrac spokesman. "We still have the bad loans mixed in that are resetting."

Although TransUnion still expects the delinquency rate to resume declining in 2012, the company is now forecasting a few quarters of elevated nonpayment rates due to the uncertain economic outlook. The company doesn't predict a return to the national peak rate of 6.9 percent, but said some increase is expected.

"More and more homeowners are likely to struggle," Martin said. "I'm not sure this is a one-quarter blip."

That echoes predictions from other sources, like RealtyTrac.

"This isn't just about bad loans anymore," said Blomquist. "It's about a bad economy that's pushing people into foreclosure."

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