TransUnion, one of the three nationwide credit reporting bureaus, has forecast that the U.S. economy will stop adding many more mortgages to the delinquency pool in 2012 and will instead begin to work through the existing housing stock.
“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,” Martin said.
Charlie Wise, director of research and consulting for TransUnion, blamed much of the lagging mortgage delinquency trend on the so-called “robo-signing” controversies which, he said, inhibited the larger mortgage servicers from working through their delinquencies.
This should clear up in 2012, Wise said.
The credit bureau also predicted that credit card delinquencies would continue at their current near record lows.
“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,” Chaouki said.
“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,” he said.
Wise added that credit card delinquencies are likely to remain lower because many of the consumers who had lower credit scores and more troubled credit histories have already been winnowed out of the industry.