Mortgage Delinquencies Set to Soar: Report

Severe delinquencies among mortgage holders increased more than 50 percent from year-ago levels during the third quarter, according to data released Tuesday morning by credit reporting agency TransUnion LLC. At the end of Q3, 3.96 percent of homeowners were 60+ days in arrears, compared to 2.56 percent one year earlier; historically, the severe delinquency rate has held the line at roughly 2 percent.

The agency also said that severe delinquencies could reach as high as 4.7 percent before this year is out, an estimate that reflects the effect of job loss and an extended recession.

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The culprit here shouldn’t surprise, if you’ve read HW for any meaningful period of time; a looming group of resets is staring down the mortgage market, many outside the subprime sector and many underwritten on 2 and 3-year timeframes. With an estimated 7.6 million U.S. households currently owing more on their home than it is worth, according to a recent study by First American CoreLogic, very few of these households will be able to refinance, even if incomes remain stable.

“There are a lot more loans that will be resetting throughout 2009 through 2011,” Becker told the Wall Street Journal. “There may be an ongoing flow of consumers who may now be able to pay their mortgage but may not be able to a year from now.”