U.S. Mortgage, Credit Card Delinquencies Forecast to Decline in 2012: TransUnion

U.S. mortgage loan delinquencies are projected to decline to five percent by the end of 2012 from 5.95 percent at the end of 2011, according to TransUnion.

TransUnion expects more through the first quarter of 2011, with a peak of 6.02 percent, followed by a decline for the last three quarters of 2011. They previously increased in the third quarter, the first increase since the end of 2009. Delinquencies are defined as borrowers who are 60 or more days late on a payment.

Although house prices and unemployment will likely face continued pressure next year, this forecast calls for gradual improvements in the second half of 2012 to other key variables, like improving credit quality of new originations, consumer confidence and GDP, that will positively influence homeowners' ability and willingness to pay their mortgages, said Tim Martin, group vice president of U.S. housing in TransUnion's financial services business unit, in a statement.

If things go as expected, there are no additional negative shocks to the U.S. economy and the average borrower's situation, mortgage delinquencies could fall as much as 16 percent in 2012 compared to 2011, he added.

Delinquency rates are expected to decline by seven percent this year, following a seven percent decline in 2010. Delinquency rates rose by 50 percent between 2006 and 2009.

A decline is projected in 38 states, with the largest drops in Arizona, at 46.25 percent, Wisconsin, at 45.52 percent and Colorado, at 40.34 percent.

TransUnion also expects credit card delinquency rates to continue to remain low in 2012, after they reached a 17-year low of 0.60 percent during the second quarter of 2011. Delinquencies, defined as borrowers who are 90 days or more late on payments, are expected to decrease from around seven percent in the fourth quarter of 2011 to 0.69 percent in the fourth quarter of 2012.

In today's uncertain economy, consumers have found that credit cards are among their most valued assets due to the flexibility they provide. As a result, consumers have made a concerted effort to make on-time payments and maintain relatively low balances, said Steve Chaouki, group vice president in TransUnion's financial services business unit, in a statement. In fact, credit card debt per borrower in the third quarter of 2011 stood at $4,762, approximately $1,000 less than the second quarter of 2009, the quarter in which the recession ended.

Thirty-nine states and the District Columbia are forecast to see credit card delinquencies decline.