TransUnion’s mortgage and credit card delinquency projections for 2012

In early December 2011, TransUnion, one of the three U.S. credit reporting agencies, released its annual forecast on consumer credit for 2012.  Its forecasts are based on economic assumptions, such as gross state product, consumer sentiment, unemployment rates and real estate values.

Mortgage delinquencies are expected to rise and then decrease by the end of 2012; credit card delinquencies are expected to continue to decline.

Mortgage delinquencies

TransUnion predicts that mortgage loan delinquency rates (ratio of borrowers 60 days or more past due) will decline to 5.95 percent at the end of 2011 and decrease to 5 percent by the end of 2012.  Mortgages have declined from fourth quarter 2009 to second quarter 2011 and are expected to rise through first quarter 2012 and decline the remaining three quarters of 2011. Mortgage delinquencies declined by 7 percent in 2011 and are projected to decline by the same amount in 2010, while the year-to-year increases from 2006 to 2009 were 50 percent.

According to TransUnion’s 2012 projections, mortgage delinquencies will decline in 38 states and increase in 12 and the District of Columbia.  The states projected to have the highest mortgage delinquency rates by fourth quarter 2012 are Florida Nevada and District of Columbia.  Those projected to have the lowest mortgage delinquency rates are North Dakota, South Dakota and Wisconsin.

“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. “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% in 2012 compared to 2011.”

Credit card delinquencies

Credit card delinquency rates (the ratio of bankcard borrowers 90 days or more past due  on one or more of their credit cards) reached the  lowest in 17 years during the second quarter of 2011 (0.60%).  TransUnion projects these rates will decrease 7 percent from fourth quarter 2011 (.74 percent) to fourth quarter 2012 (.69 percent).

According to TransUnion’s 2012 projections, credit card delinquencies will decline in 39 states and the District of Columbia and increase in 11.  The states, projected to have the largest expected delinquency rates by fourth quarter 2011, are Mississippi, Louisiana, and Missouri. Those projected to have the lowest delinquencies by that time are North Dakota, Wyoming and Alaska.

“Credit card delinquencies are expected to remain fairly steady in 2012 ranging between 0.69% and 0.76% — levels far below those typically observed in the last 15 years,” said Steve Chaouki, group vice president in TransUnion’s financial services business unit. “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. 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.”

Credit Damage Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Credit Report, Credit Score, Debt, Financial, Improving Credit, Money & Identity

This post was written by John Ulzheimer