Mortgage Delinquencies Plumet and Subprime Borrowers Get Shot

TransUnion, the credit reporting people, have just released new data that certainly makes it appear the big wave of mortgage defaults and delinquencies is over.

In fact this data marks the ninth quarter of declines in the rate at which borrowers are 60 or more days behind on their mortgages. We haven’t see rates this low since the second quarter of 2008.

The data of the end of the first quarter of 2014 shows that delinquency rates stand at 3.61 percent. That marks a reduction of more than 24 percent from the first quarter of 2013.

“It’s encouraging to see mortgage delinquencies drop once again, especially during a period when mortgage originations slowed considerably,” said Steve Chaouki, head of financial services for TransUnion. “This trend in improved performance is driven in part by lenders working their way through the foreclosure backlog, along with continued conservatism in underwriting new mortgages.”

But there is good news buried in the data for people that have credit scores below 700. The subprime consumers are finding increasing access to new mortgages. Mortgage originations for these consumer rose from 4.98 percent of mortgages issued in the fourth quarter of 2012 to 7.21 percent in the fourth quarter of 2013.

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In the heyday of the highflying mortgage originations back in 2007, the subprime group of consumers accounted for 15.97 percent of originations.

And the number of active mortgage accounts is increasing as well. In the first quarter of 2014 there were 53.47 million mortgages, up from 53.06 million in the first quarter of 2013.

TransUnion is forecasting that the downward consumer delinquency trend will continue into the second quarter of 2014, with mortgage delinquencies falling to approximately 3.40% by the end of June.

The largest yearly declines in mortgage delinquencies has been observed in states were consumers were hit hard with many mortgage modification schemes and mortgage rescue sales pitches. As it stands now the decline in delinquencies from last year is Arizona (Down 37.8%), California (Down 36.9%), Nevada (Down 34.0%).