Mortgage Delinquencies Soar

Most of the news about housing has been bad since the beginning of February. Heavy snow probably kept potential buyers out of the market. New data show that the number of foreclosures will probably rise in 2010. The forecast from research operation RealtyTrac is that the figure could hit three million.

Unemployment could rise through the middle of this year, according to the Congressional Budget Office. That means a continued risk of home loan defaults and a smaller universe of potential homebuyers. The number of mortgages which are underwater is still high, which makes it hard for homeowners to sell their houses without the need to write a large check to their banks at closing.

New data from credit research company TransUnion shows the mortgage delinquencies soared and were up for the 12th quarter in a row. Mortgages on which payments were more than 60 days past due hit an all-time high at 6.89% in the last quarter of 2009.  TransUnion reported that the quarter “marks the first time the mortgage delinquency rate increase did not decelerate after doing so for three consecutive periods.” Year-over-year, mortgage borrower delinquency was up about 50 %.

Rising delinquency rates are a reasonable predictor of an increase in foreclosures and that means that the number of abandoned homes and houses sold at below market prices will increase again in 2010.

TransUnion said that some of the problem with delinquencies was due to people who become low on cash at the end of each year. But, that would have been true of the figures from the last quarter of 2008 as well. Whether people will have additional access to cash during the early part of this year is uncertain, but consumers’ ability to borrow from banks is still poor and the nation’s pool of home equity has been destroyed, taking another source of credit away from home owners.

There is little hope that the housing situation will improve during the first half of the year, at least based on most information which has come out since January 1. The market gets to wait for the early data for home buying activity and defaults which are occurring during this quarter. So far, there is little in the numbers from late 2009 to offer much encouragement.

Douglas A. McIntyre