Good news for credit unionCFOs: TransUnion forecast 2016 declines in national delinquencyrates for mortgages, auto loans and credit cards.

According to the reporting agency’s Insights report, releasedMonday, the 60-day mortgage delinquency rate will drop to 2.06%, down froma high of 6.89% in the fourth quarter of 2009.

The 60-day auto loan delinquency rate is expected to decrease to1.11% and 60-day credit card delinquencies will remain steady at1.46%, the report read.

“Our forecast highlights that we are no longer in recovery – wehave recovered from the Great Recession,” TransUnion Vice Presidentof Research and Consulting Ezra Becker said.

“Both the mortgage and credit card markets are performingextremely well, with increased consumer participation and continuedlow delinquency rates. Millions of borrowers have gained access tocredit card loans in just the past few years. And despite the factthat more consumers – and more non-prime consumers – are enteringthe housing market, delinquency levels have remained in check andbalances are growing. This points to responsible lending practicesand a consumer base that is clearly in a better position to makepayments on their loans,” added Becker, who works inTransUnion’s financial services business unit.

Mortgages

TransUnion’s 2.06% projection for the year-end 2016 mortgagedelinquency rate would place this metric in the range traditionallyobserved prior to the mortgage crisis.

“We have observed that a ‘normal’ delinquency rate fell between1.5% and 2% in the past, and our forecast puts the nation back atthis level,” Steve Chaouki, executive vice president and head ofTransUnion’s financial services business unit, said. “Newer vintagemortgage loans have been performing at this level for the last fewyears, but a combination of factors such as the funneling of badmortgage loans through the foreclosure process, an improvement inthe employment picture and an uptick in housing prices were neededto get back to normal.”

Mortgage debt per borrower has also slowly gained in recentyears, which is partly due to a rebound in housing prices. Debtlevels are expected to experience a $9,000-plus gain by the end of2016 from the year-end low observed in 2012.

“This is a clear indicator that housing prices are recoveringand consumers are gaining access to more mortgage loans,” Chaoukisaid. “Fannie Mae’s recent announcement that it would use trendeddata in the assessment of mortgage applicants could also very wellboost mortgage originations in the second half of 2016.”

A previous TransUnion analysis found that with the use oftrended data, the percentage of consumers in the super prime risktier would increase from 12% of the population to 21%. Super primeconsumers generally have the greatest access to new loans at thelowest pricing, the report read.

TransUnion data show the number of mortgage accounts hasremained relatively low for much of the last three years, thoughgrowth has been observed during the last two years. As of thirdquarter 2015, which represents the latest available data, therewere 52.6 million mortgage accounts, approximately 7 million fewerthan in the third quarter of 2009, when there were 59.6million.

“We are a long way from returning to pre-recession levels interms of mortgage accounts, but changing consumer preferences forhousing also may play a role in this slow recovery,” Chaouki said.“If the economy continues to perform well, we believe the netnumber of mortgages will increase over the next year.”

Credit cards

The serious credit card delinquency rate was expected to remainat around 1.5%, the year-end levels observed for the last fouryears. As usual, seasonal movements will occur throughout the year,but consumers are expected to maintain their strong paymentperformance, TransUnion said.

The credit card industry has been performing well even as it hasextended credit to millions of additional consumers during the lastfew years. As of the third quarter of 2015, there were 368.8million credit card accounts, up from the 354.8 million figure thesame quarter last year. Comparatively, in the third quarter of2009, there were only 337.8 million credit card accounts.

“As delinquency rates for credit cards remain low, lenders aremaking card credit increasingly more available to consumers acrossthe risk spectrum,” Becker said. “Those consumers are generallyaccepting those card offers, using that card credit and managingthe debt responsibly. In short, these are the hallmarks of a creditmarket that is functioning extremely well.”

Credit card debt per borrower was expected to remain essentiallyflat in 2016, dropping from an estimated $5,281 in fourth quarterof 2015 to $5,262 in the final quarter or 2016. Those numbers arewell below levels observed just after the Great Recession, when theaverage outstanding balance was $6,051 in the fourth quarter of2009, the report read.

While debt levels have dropped more than 10% since 2009, averagecredit lines have not changed much in the last six years,decreasing from $21,942 in the third quarter of 2009 to $21,613 inthe same quarter in 2015.

The biggest changes to credit lines occurred with subprimeconsumers, those with a credit score lower than 601.

In the third quarter of 2009, subprime consumers had $6,993 inavailable credit; that dropped to $5,136 as of the third quarter of2015.

“Credit card lenders manage their portfolio risks by limitingcredit access for higher risk borrowers,” Becker said. “Much ofthis risk management occurred between 2009 and 2012, but we’ve seenstabilization on this front for the last three years. As theeconomy continues to improve and credit card performance remainsstrong, it’s quite possible consumers in the subprime risk groupcould see more credit opportunities in the near future.”