Late payments on mortgages, credit cards expected to plummet

NEW YORK -- Consumers are expected to get better control on their mortgage and credit card payments next year as the economy slowly improves.

Credit reporting agency TransUnion predicts that delinquencies, or late payments, on the two biggest major forms of borrowing will drop sharply again in 2011, after substantial declines seen in the second half of this year.

More homeowners in every state and the District of Columbia will get current on mortgage payments, according to a forecast from the Chicago company. That includes the hardest-hit states of Nevada, Arizona and Florida.

TransUnion said that by the end of 2011, it expects just 4.98 percent of mortgages will be 60 days or more behind. The mortgage delinquency rate peaked at 7.89 percent in the fourth quarter of 2009.

The prediction is still well above the 1.5 to 2 percent delinquency rate considered "normal" for mortgages.

Late payments on credit cards didn't skyrocket the way mortgages did during the recession, in part because card users were careful to keep payments current so their credit lines didn't get shut down, said Ezra Becker, vice president of research and consulting for TransUnion financial services. But problem payments did increase and banks had to write off billions in balances they were unable to collect.

Delinquency rates have already dropped dramatically since their recent peak in the first quarter of 2009, when about 1.21 percent of all cards were 90 days or more past due. Already at their lowest rate in more than five years, TransUnion expects card delinquency to drop to 0.75 percent by the end of 2010.

As consumers continue to be careful about how they use credit cards in 2011, TransUnion expects that rate to drop even further, ending the year around 0.67 percent of all balances.