LOS ANGELES (AP) — U.S. homeowners are doing a better job
of keeping up with mortgage payments, a trend that has reduced the rate
of late payment on home loans to the lowest level in more than five
years.
The percentage of mortgage holders at least two months
behind on their payments fell in the October-December quarter to 3.85
percent from 5.08 percent a year earlier, credit reporting agency
TransUnion said Wednesday.
The last time the mortgage delinquency
rate was lower was 3.61 percent in the second quarter of 2008. The
firm’s data go back to the second quarter of 2007.
The latest rate also declined from 4.09 percent in the third quarter, the firm said.
Struggling
homeowners have seen their finances shorn up by rising home values, an
improving job market and efforts to restructure home loans so they’re
more affordable. That has enabled them to make timely payments.
Another
key driver in the improved late-payment rate: Many of the risky home
loans made before 2008 that went unpaid are no longer a factor, since
the homes have been sold or foreclosed upon. Loans issued since then,
after banks tightened lending standards, are less likely to go unpaid.
"We
are on the downward slope of the mortgage delinquency curve, so we
expect to continue seeing delinquency rates that have not been seen for
several years," said Steve Chaouki, head of financial services for
TransUnion.
The rate of late payments on home loans has been
steadily declining over the past two years. At the same time, U.S. home
sales and prices have been rebounding over the past two years, while
foreclosures have been declining.
Moderate but stable job gains,
still-low mortgage interest rates, and tight supply of homes for sale
have helped fuel the housing rebound. That’s also made it easier for
homeowners to refinance, catch up on payments or sell their home,
avoiding foreclosure.
Many borrowers also are making keeping up
with their mortgage payments a priority over other financial
obligations, encouraged by rising home values and lower unemployment,
Chaouki said.
This is a reversal of a trend during the last
recession and housing downturn, which left many homeowners owing more on
their home than it was worth.
Even so, the mortgage delinquency
rate is still about twice as high as it was before the housing bubble
burst in 2007. That suggests that many homeowners still are struggling
to make their payments. It also reflects that many home loans made
during the housing boom remain unpaid but have yet to work their way
through the foreclosure process.
TransUnion expects that mortgage
delinquencies will continue to decline, falling to a rate of 3.7 percent
by the end of March. The forecast assumes the U.S. economy will
continue to strengthen and foreclosures will continue to thin out the
backlog of older loans gone unpaid.
All told, all the states and
the District of Columbia posted sharp annual declines in their mortgage
late-payment rate for the fourth quarter, the firm said.
Arizona
(38.6 percent), California (37.8 percent) and Nevada (34.7 percent) had
the biggest annual declines. Only New York and New Jersey didn’t post a
double-digit percentage drop in their mortgage delinquency rate.
Meanwhile, the number of new home loans made by lenders fell in the third quarter as interest rates
spiked last summer.
The
data lags by a quarter, so the latest TransUnion figures cover the
July-September period. They show that new home loans originated during
the quarter declined to 1.9 million from 2.3 million in the third
quarter of 2012.
The share of new home loans made to borrowers
with less-than-perfect credit grew to 6.61 percent from 5.55 percent a
year earlier. That’s still well below the roughly 16.3 percent share of
new mortgages that went to non-prime borrowers in the third quarter of
2007, just before the recession.
In the VantageScore credit rating
scale, borrowers with a score lower than 700 on a scale of 501-990 are
considered non-prime borrowers.
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