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16 MORTGAGE DELINQUENCIES WAY DOWN, COULD NORMALIZE IN 2015 Mortgage delinquencies are steadily declining and could fall to below pre-recession levels by the end of 2015. According to the latest National Consumer Credit Trends Report released by Equifax, the cumulative balance of seriously delinquent mortgages (those 90 days or more overdue or in foreclosure) totaled $198.8 billion for November, the lowest level in five years. at amount represented more than a 29.8 percent decrease from November 2013. Lenders are also writing off the fewest number of loans since before the housing bubble burst. e balance of home finance write-offs year-to-date through the first 11 months of 2014 was $91.2 billion, its second lowest level in eight years, according to Equifax. e number of delinquent first mortgages, which are those 30 days or more past due, comprised 4.54 percent of outstanding mortgage balances in the United States in November, according to Equifax. is percentage represented a decline of 5.87 percent from November 2013. e collective outstanding balance for home equity lines of credit (HELOCs) is also on the decline. e November 2014 HELOC balance was $515.4 billion, also the lowest level in five years, and a decrease of 3.6 percent year-over- year, according to Equifax. e total number of outstanding HELOCs in the United States dropped down to 11.1 million, the lowest level in 10 years. Delinquent balances on HELOCs accounted for 2.37 percent of outstanding balances in the United States in November, dropping from 2.70 in November 2013, according to Equifax. Further, data released by TransUnion indicates that the nation's mortgage delinquency rate is expected to fall down to 2.51 percent by the end of 2015, its lowest level since prior to the housing bust. TransUnion predicted that the mortgage loan delinquency rate, which is the ratio of borrowers 60 or more days past due on mortgage payments, will drop to 3.12 percent by the end of 2014. e projected level of 2.51 percent for the end of 2015 would be the lowest level since Q 3 2007's rate of 2.61 percent, according to TransUnion. e national mortgage delinquency rate has declined almost every quarter since peaking at 6.93 percent in Q1 2010, according to TransUnion. e rate experienced minor increases in Q 3 and Q 4 2011. e mortgage delinquency rate stood at 3.36 percent for Q 3 2014, TransUnion reported. "We expect the national mortgage loan delinquency rate to continue its decline throughout 2015, marking four consecutive years of quarterly decreases," said Steve Chaouki, head of financial services for TransUnion. "We anticipate interest rates to remain relatively low next year and unemployment rates to continue their decline, both of which should help fuel home sales and improve consumers' ability to pay. Foreclosures are also expected to continue to funnel through the legal system in 2015, which will reduce delinquencies that have been lingering for some time. All of these factors will contribute to a further decline in mortgage delinquencies." One contributing factor to the steady decline in the number of mortgage delinquencies is the difference in the number of loans to subprime consumers, according to TransUnion. In Q 3 2007, the last time the delinquency rate was around 2.5 percent, 10.3 percent of mortgage loans in the United States were to subprime borrowers (6.4 million subprime out of 62.4 million total mortgage loans). By comparison, in 2014, only 7.4 percent (3.9 million out of 52.8 million) of all mortgage loans in the United States were to subprime borrowers, according to TransUnion. "Even though several years have passed since the mortgage crisis, mortgage lending remains relatively tight," Chaouki said. "In the last year alone (Q 3 2013 to Q 3 2014), we have recorded nearly one half million fewer subprime mortgage accounts than in the prior 12 months, even as the total number of mortgage accounts overall grew by about 500,000." While state delinquency rates were generally in line with the national average that peaked in late 2009 to early 2010, TransUnion predicts that 33 states will have delinquency rates below 2.5 percent by the end of 2015. According to TransUnion's forecast, 12 states are projected to see a decrease of 30 percent or more in their delinquency rates next year, ahead of the national average of 20 percent for that time frame. TransUnion predicts declines or relatively steady delinquency rates throughout 2015 for all but three states, where increases are expected: Idaho (from 2.16 to 2.44 percent), Massachusetts (from 3.18 to 3.26 percent), and North Dakota (from 0.97 percent to 1.02 percent). e largest delinquency rate declines for 2015 are forecasted for Nevada (from 4.65 to 2.97 percent), Georgia (from 3.31 to 1.92 percent), Maryland (4.17 to 2.83 percent), and Illinois (3.37 to 2.17 percent), according to TransUnion. The number of states that experienced year-over-year declines in foreclosure inventory of 30 percent or more in November 2014. Utah had the highest rate of decline with 48.9 percent. Source: CoreLogic STAT INSIGHT 35

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