Mortgage Late Payments Predicted To Fall In 2011

And now for some good news. TransUnion, a major credit bureau, thinks mortgage delinquencies will drop dramatically next year.

The mortgage delinquency rate,  the percentage of homeowners with payments more than 60 days late, will plummet almost 20 percent by the end of 2011, falling from this year’s 6.21 percent to 4.98 percent.

Why? Unemployment will slowly fall. Home prices will continue to stabilize and increase in some areas. “While there is continued price pressure in many markets, we expect a growing number of areas of the country to experience a rise in property values along with some stabilization of values in those states and markets hardest hit by the recession,” said Steve Chaouki, a TransUnion vice president.

The drop would more than double the 9.87 percent yearly decline of 6.89 percent at the end of 2009 and the 6.21 percent rate at the end of 2010. The company used its database of 27 million records on consumer credit use to make its predictions.

If delinquencies do drop, the housing market and overall economy could improve. Delinquencies often lead to foreclosures, desperate home sales, and lower home values. Read about tips on avoiding foreclosure.

Delinquencies rates had increased sharply in recent years: 54 percent between 2006 and 2007, 53 percent between 2007 and 2008 and 50 percent between 2008 and 2009.

All states will see double-digit declines in mortgage delinquencies, TransUnion predicts. States expected to have the largest declines in mortgage delinquencies — Nevada (-24.77 percent), Arizona (-24.27 percent) and Florida (-23.90 percent) — are the same states that have had the highest delinquency rates this year — (Florida, 11.06 percent; Nevada, 10.87 percent; and Arizona, 7.59 percent).

Not surprisingly, Midwest states have the lowest delinquency rates are should continue to have the fewest late payments. They are: North Dakota (1.12 percent), South Dakota (1.80 percent) and Nebraska (2.05 percent)

Late payments for credit cards will also drop sharply, the company says.

“For 2011, TransUnion does not expect to see any material change in the mindset of consumers,” said Ezra Becker, the company’s vice president of research and consulting. “Although the economy is expected to improve, in the short term consumers are likely to continue to view their credit cards as instruments to get them through difficult financial straits, so we expect they will continue to utilize them prudently.”