TransUnion: Surprising increase in souring mortgages
The rate of homeowners falling behind on mortgage payments surged unexpectedly in the fourth quarter, with home loans 60 or more days past due reaching 6.9% of all home loans nationally, 11.0% in California and a whopping 18.5% in Riverside County, according to a study released Tuesday by credit reporting firm TransUnion.
TransUnion samples 27 million consumer files at random each quarter to track credit trends, including the number of mortgages that are at least 60 days late or in foreclosure. The results are seen as a precursor to foreclosures. This was the 12th straight quarter of increasing delinquencies.
The increasing speed at which loans were souring surprised TransUnion, reversing the trend of the previous three quarters, in which delinquency rates, although going up, rose at a slower pace each quarter.
On the national level, the number of troubled mortgages in the survey rose 15.7% from the third quarter of 2008 to the fourth quarter of 2008, with subsequent increases of 14.0%, 11.3% and 7.6% in the first three quarters of 2009.
But the number of loans at least 60 days in arrears rose by 10.2% from the third quarter last year to the final quarter.
The deceleration earlier in 2009 had "created a sense of cautious optimism" at TransUnion, said FJ Guarrera, vice president of the financial services unit. "We had the feeling things were turning around. ... But this uptick has got us turning a watchful eye on what’s occurring. We didn’t anticipate it."
Six months ago, TransUnion had predicted California's rate of delinquencies would begin to decline in the middle of this year. The prediction now: not until the first or second quarter next year, Guarrera said.
The most likely explanation for the trend is a combination of factors, he said: payment increases kicking in on adjustable mortgages, particularly pay-option loans; the discouragement of borrowers who owe more than their homes are worth; and loans that have fallen back into delinquency after being been modified by lenders to ease terms for borrowers.
Seasonality may also gave been a factor: Consumers run short on cash at the end of the fourth quarter after buying Christmas gifts but before receiving year-end bonuses and tax refunds.
Riverside’s 18.5% delinquency rate was 6 percentage points higher than the 12.5% recorded in the fourth quarter of 2009. In the other battered Inland Empire county, San Bernardino, the rate increased from 11.2% to 17.2% year over year, TransUnion said. California as a whole went from 6.9% to 11% year over year; Los Angeles County jumped from 6.8% to 11.4%; and Orange County rose from 5.3% to 8.9%.
The national rate of 6.9% compared with 4.6% in the fourth quarter of 2008 and 2% in the first quarter of 2007.
"Sometimes it’s hard for consumers to understand the depth of this situation," Guarrera said. "Historically mortgage delinquency averaged from 1.5% to 2%."
There will be more data to consider Friday, when the Mortgage Bankers Assn. issues its quarterly report on deliquencies.
--E. Scott Reckard