Mortgage Defaults Push up Number of Repossessed Homes
The default rate on mortgage loans across the U.S. reached a record level in the second quarter, based on a report from credit reporting firm Trans Union.
But the pace of increase has slowed, according to TransUnion, possibly signaling the start of a turnaround in the struggling housing sector.
According to the TransUnion report, the ratio of homeowners with home loans who are in default by at least 60 days rose to 5.81 percent across the country in the second quarter. The second quarter increase marked the tenth consecutive quarter that an increase occurred.
The 5.81 percent ratio is a staggering 65 percent increase from the 3.53-percent ratio in the second quarter of 2008.
A default of at least 60 days is viewed by analysts as a precursor to actual foreclosure based on past records. Most homeowners have difficulties in saving money to cover the two months of payments that they missed, in addition to the current month that they need to pay.
While the second quarter default rate reached a new record level, the rise from the previous quarter was only 11.3 percent, a drop from the nearly 16 percent rate of growth in the two previous quarters.
The slowdown in growth rate may be a positive sign, according to FJ Guarrera, a top financial services executive of TransUnion. He added that there is reason for some level of optimism.
Guarrera explained that it is difficult to pinpoint the exact reasons for the slowdown in the growth of the nationwide delinquency rate, but he cited federal and state foreclosure prevention programs. Many homeowners could be getting real help from various initiatives launched to cut down foreclosures, according to Guarrera.
He also mentioned the common observation that more Americans are now getting very careful in the way they spend their money.
In the second quarter, Florida, Nevada, California and Arizona remained the 4 U.S. states with the biggest default rates. They are also the states with the highest number of repossessed homes, affirming the contention that delinquencies are a precursor to actual foreclosures.
In Nevada, the default rate soared to 13.8 percent, a high jump from 6.63 percent in the second quarter of last year and a jump from 11.6 percent in last year’s first quarter.
Meanwhile, the default rate in Florida soared to 12.3 percent from 6.47 percent in the second quarter of 2008 and from 11 percent in first quarter of this year.
