November 1 2010 (Chris Moore)
In a report released by credit bureau giant TransUnion, mortgage delinquency “roll rates” peaked in the summer of 2009. The “roll rate” is the percentage of borrowers who enter a worse delinquency stage on their mortgage payments each successive month. In other words, a higher percentage of borrowers are behind on their payments at 60 days than there were at 30 days and more are behind at 90 days than were at 60 days until eventually they go into foreclosure.
The report revealed roughly 25 percent of consumers who were 30 days past due on their mortgages as of June 2009 became 60 days late a month later, and more than a third who were 60 days late became three months behind during the same period.
“Consumers who are past due on their mortgages are always susceptible to going into more severe stages of delinquency,” said FJ Guarrera, one of the authors of the study.
“We found that this vulnerability was exacerbated during the recession as housing prices declined and unemployment increased.”
The report also found that those with a home equity line of credit or home equity loan exhibited lower roll rates during the housing boom and higher ones once the mortgage crisis began.
“In March 2006, the national 30-60 mortgage roll rate was 12.56 percent for borrowers with home equity loans/lines and 17.16 percent for those without. However, by March 2009 the 30-60 roll rates had skyrocketed to 26.55 percent for borrowers with home equity loans/lines, while increasing to only 22.66 percent for those borrowers without.”
This may have to do with the fact that many of the loans being secured towards the end of the housing boom were high risk loans used by borrowers employing second mortgages to avoid putting anything down on their homes (100% financing).
Many of those high risk loans with high loan-to-values are now deeply underwater, leading to a high rate of default, whether by necessity or choice.
And as one would expect, in areas of the country where unemployment has been less severe and home prices have been relatively stable, roll rates have been at or below the national level.
Tags: roll-rate, foreclosures, high risk loans, TransUnion, delinquency, housing prices decline, unemployment, mortgages