TransUnion is out with data on 2014 delinquency projections. They are showing both flat delinquencies in mortgage and credit card areas. This is bad news for debt relief companies who are looking for increased demand of the services they offer.
Not only is the projected trend to remain flat but at historically low levels.
The national mortgage loan delinquency rate (the ratio of borrowers 60 or more days past due) is projected to decline to 3.75% by the end of 2014 from an estimated 3.94% at the conclusion of 2013. While the mortgage delinquency rate, a statistic generally considered to be a precursor to foreclosure, is expected to decline for the fifth consecutive year, the forecasted drop will be the lowest observed in that timeframe.
Credit card delinquency rates (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards) are expected to rise nearly 10% from 1.51% in Q4 2013 to 1.66% in Q4 2014. Even with that increase, the card delinquency rate would remain far below average historical levels. Between 2007 and 2012, the credit card delinquency rate has averaged 2.38% during the fourth quarter.
“The credit card delinquency rate should remain relatively low next year,” said Steve Chaouki, a co-author of several credit lending studies and group vice president in TransUnion’s financial services business unit. “Delinquency has remained near all-time lows post-recession as lending to the subprime population was muted.”
Recent TransUnion data show that the subprime pool has declined both in absolute volume and as a percent of the overall credit card market since its peak before the recession. In Q2 2007, subprime borrowers opened 5.1 million new credit card accounts, comprising nearly 29% of all credit card originations. That dropped to a second quarter low in 2010, when subprime consumers opened just 871,000 credit card accounts and comprised under 12% of card originations in the quarter. In Q2 2013, subprime borrowers opened 1.5 million credit card accounts, slightly less than 14% of all new credit card accounts. In that same vein, as of Q3 2013 subprime borrowers comprised 8% of all credit card accounts. In contrast, in Q3 2007 subprime borrowers made up 13% of the total credit card population.
“This is a significant point because subprime borrowers traditionally have much greater delinquency rates than the rest of the population,” said Chaouki. “In the third quarter of 2013, the subprime borrower credit card delinquency rate was 13.35% while the total delinquency rate for the nation was only 1.36%. If there are fewer credit cards in the subprime borrower segment, the overall credit card delinquency rate will remain low.
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