CHICAGO (12/8/11)--Consumers are shifting their payment priorities from paying their mortgage first to paying other bills, according to TransUnion, a Chicago-based credit reporting agency. But the bureau expects the balance to shift again if housing prices go up.
In its forecast released Wednesday for mortgage and card delinquencies for 2012, the bureau noted that before the recession, homeowners put their mortgages first in line for payment because of concern about their reputation and the emotional attachment to owning--and losing--a home (USA TODAY and MarketWatch Dec. 7). They protected their home equity first and if money was scarce, they would default on their card payments.
But, when house prices dropped during the recession, many homeowners found they owed more on a mortgage than the home was worth. That and the tightening of credit turned the priority around, and paying off credit cards became first priority, said TransUnion.
The bureau said it expects the balance to shift again if housing prices go up and people begin rebuilding equity in their homes.
It also forecast that the mortgage delinquency rate (where borrowers are at least 60 days behind in payments) will go up to about 6% through the first quarter of 2012, and drop to 5% by the end of 2012. Typically the mortgage rate is around 1.5% to 2%, but it peaked at 6.89% during fourth quarter of 2009.
Banks, working through a backlog of foreclosures complicated by the robo-signing allegations in the industry, will clear more foreclosures off the books next year, TransUnion said.
Card delinquencies, or payments that are 90 days or more overdue, increased slightly during third quarter and could inch up during fourth quarter 2011 and first quarter 2012. However, they still remain near historic lows. TransUnion added that bank-issued cards will see fewer late payments.