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Mortgage delinquency rate drops

By Judy Martel · Bankrate.com
Tuesday, February 12, 2013
Posted: 3 pm ET

Since the housing bubble burst, more borrowers have been steadily getting better at paying their mortgages on time, according to a study by credit reporting agency TransUnion.

In the fourth quarter of 2012, the percentage of borrowers who were behind by at least two months on their mortgage payment fell from 6.01 percent to 5.19 percent from a year earlier. In fact, the rate hasn't been this low since December 2008, when the economy was sliding into the Great Recession.

In fourth quarter 2009, the delinquency rate hit its high of nearly 7 percent and has been steadily decreasing since then. But even though the rate is trending downward, it's still well above the historical average of 1 percent to 2 percent delinquency.

The improvement in mortgage repayment comes mostly from borrowers who have taken a loan since 2008, according to the study. There are several reasons why they are less likely to become delinquent: Home prices are more affordable than they were during the years leading up to the recession, and mortgage rates are at all-time lows. Also, the once-popular adjustable-rate mortgages, which landed a lot of borrowers in deep water when the rates rose, have become less desirable in favor of fixed-rate mortgages. Lenders have also made it tougher to qualify for a loan and require a larger down payment.

Loans from 2008 or earlier make up 60 percent of all mortgages in the U.S., according to the study, and represent 90 percent of those that are at least two months late. But a recovering housing market is helping them climb out of delinquency, too, because as home prices rise, equity increases, making it possible to sell or refinance into a cheaper rate.

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