Magazine article American Banker

Cash-Strapped Consumers Prioritize Mortgage Debt as Housing Market Steadies

Magazine article American Banker

Cash-Strapped Consumers Prioritize Mortgage Debt as Housing Market Steadies

Article excerpt

Byline: Sarah Todd

As home values sank following the housing bust, many cash-strapped Americans opted to stop making mortgage payments rather than fall behind on credit card bills and car loans. Now, in a return to pre-recession norms -- and with home values rising again -- more struggling consumers are prioritizing mortgage payments over other debt, according to a TransUnion study released Thursday.

In December 2012, 1.9% of Americans were more than 30 days past due on their mortgages, 1.8% were behind on their credit card payments and 0.9% were delinquent on automobile loans, according to TransUnion's survey of consumers with mortgage, auto loan and credit card payments. Though delinquencies have been declining in all three categories, they have fallen most sharply in mortgages over the last three years as fewer borrowers walk away from their homes.

"Things are getting back to normal," says study co-author Steve Chaouki, group vice president in Transunion's financial services business unit. "For the first time since the housing bubble burst, consumers are valuing their mortgage payments as much as their credit cards."

Mortgage delinquency rates track closely with the housing market's collapse and gradual recovery, the study found. The report compared year-over-year changes in Standard and Poor's Case-Shiller 20-City Home Price Index with the difference between credit card and mortgage delinquency rates.

In January 2009, when the home price index plummeted 34 points from the same period the year before, the difference between mortgage and credit card delinquencies was just 40 basis points. By December 2009 mortgage delinquencies had caught up with the grim realities of the housing market and the spread widened to 100 basis points. Among consumers with credit card, mortgage and car debt, 3. …

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