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Bad loans will linger in 2013

By Polyana da Costa ·
Thursday, December 13, 2012
Posted: 5 pm ET

The national mortgage delinquency rate will remain well above normal levels in 2013, mainly because of mortgages that have been past due for more than a year, according to a forecast by credit rating agency TransUnion.

The rate -- which includes all loans that are more than 60 days late -- is expected to drop slightly by the end of next year but will stay above 5 percent.

The "normal" delinquency rate (an average from 1999 to mid-2007) is about 1.6 percent, says Tim Martin, group vice president of U.S. housing in TransUnion's financial services business unit.

"If we continue at this pace, you are talking about another 10 years before we get back to normal" he says.

On the bright side, he says the high rate is mostly driven by loans that have been delinquent for more than a year, rather than borrowers who recently fell behind on their payments. When the loans that have been past due for more than a year are removed from the calculation, the delinquency rate falls to about 2.5 percent, he says.

Another sign that this is an old problem? More than 80 percent of the loans that are delinquent were taken out prior to 2008, he says.

"The new (loan) originations are performing very well," Martin says.

According to TransUnion's projections, by the end of 2013, the states with the highest mortgage delinquencies will be:

Florida: 11.68 percent

Nevada: 8.35 percent

New Jersey: 7.68 percent

Have a question about these bad loans? I'm @PolyanaD on Twitter.

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December 18, 2012 at 10:13 pm

l feel the system is working for the people l have witnessed this for seven years.Many people loosing savings 401 k and homes including me what do you think is up with this/

Richard Lay
December 17, 2012 at 10:30 am

We have a home mortgage and car payment that is 1 month behind and banks don't want to work with you any more, we are getting calls about 7 times a day. Years ago our mortgage bank would help by allowing us to skip a payment and tack it on the back of the loan so you could get caught up!
We are on a fixed income and my wife has had 2 strokes this year.
It works out to pay prescriptions get food or pay bills.
The irony is my taxpayer money went to bail many of these banks when they needed help!