Las Vegas mortgage delinquency rate leveling off

Nearly one in five Las Vegans was more than 60 days late on their mortgage in the second quarter, a credit reporting official said Wednesday.

But it's getting better. Really, it is.

The 60-day mortgage delinquency rate fell for the second straight quarter in Las Vegas, a sign that delinquencies may have leveled off after skyrocketing over the past three years, an executive for TransUnion credit reporting company said.

Las Vegas showed a delinquency rate of 18.18 percent in the second quarter, down from 18.61 percent in the previous quarter and from 18.89 percent in fourth quarter 2009.

Las Vegas still has the second-highest mortgage delinquency rate in the nation, trailing only Miami, said Ezra Becker, director of consulting and strategy for Chicago-based TransUnion. The national rate is 6.67 percent.

Second-quarter delinquency rates continued to be highest in Nevada (15.86 percent) and Florida (15.02 percent), while the lowest rates were in North Dakota (1.61 percent), South Dakota (2.23 percent) and Nebraska (2.61 percent), Trans- Union reported.

"Despite the fact that Las Vegas shows severe mortgage delinquency, there is good news in the plateau," Becker said Wednesday during a visit to Las Vegas to meet with Trans- Union clients.

He estimated the delinquency rate for Las Vegas will climb to 18.33 percent by the end of the year. The number of mortgage loans delinquent by 60 or more days has increased 238 percent since the beginning of the recession in fourth quarter 2007.

The average mortgage debt per borrower in Las Vegas declined to $245,645 in the second quarter, down 7.55 percent from $265,707 in the year-ago period, TransUnion reported.

Becker said there are two primary drivers of mortgage delinquency in Las Vegas. One is 14.1 percent unemployment, which means more people are unable to pay their mortgages. The other is 55 percent housing price depreciation, which means more people are unwilling to pay.

It's important to distinguish between "strategic defaults" and "survival defaults" because they warrant entirely different responses, Becker said.

The traditional payment hierarchy started with the mortgage payment and worked its way down to automobile payments and credit cards.

That changed with the recession, Becker said. Starting in first quarter 2008, the percentage of borrowers delinquent on their mortgage surpassed the percentage delinquent on their credit card payments.

"Vegas is a very interesting illustration in that it was the fastest-growing city and home equity growth was tremendous and people took advantage of that," he said. "People still owe what they owe on their homes. Housing valuation depreciation does not necessarily or automatically mean you should be forgiven part of your debt."

The loan modification process is not perfect, consumers are not always rational in their expectations and lenders don't always respond appropriately to the borrower's financial situation, Becker said. It will take both sides working in partnership to produce the best results, he said.

"Lenders should generally be lauded for their Herculean effort to get in compliance and respond to very difficult circumstances," he said.

Consumers should do their best to make minimum payments on time every month and should talk to their lender before stopping payments, Becker said. Lenders are much more amenable to finding a solution today than they used to be, he said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.