TransUnion Study – Life After Foreclosure | Mortgage-Only Defaulters are NOT Deadbeats

Life After Foreclosure Study: Mortgage-Only Defaulters Not as Risky as Expected — Says TransUnion

Study Also Finds Persons Failing to Pay Mortgage May Not Have Had Excess Liquidity

“There appears to be a pocket of opportunity among mortgage-only defaulters that is not the result of excess liquidity, but rather the unique circumstances of the recent recession,” said Steve Chaouki, group vice president in TransUnion’s financial services business unit. “This new market segment that the recession created is an important one for lenders to understand. They have the potential, today, to be stronger and more reliable customers.”

Additional evidence suggesting the “excess liquidity theory” was not in effect during the recession was witnessed when comparing consumers who were 120 days past due on their mortgages, but opened new auto loans at various times after their delinquency. The percentage of consumers delinquent on those auto loans decreased as more time passed.

60+ days delinquency levels

—  Opened within six months — 10.4 percent delinquent
—  Opened within seven to 11 months — 9.7 percent delinquent
—  Opened 12 or more months later — 9.3 percent delinquent

This recession was unique in that certain consumers who defaulted on mortgages would otherwise be good credit risks. It appears their actions were driven more by difficult economic circumstances than by any inherent inability to manage debt,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “Also, these results are well-aligned with our past research into the reversal of the payment hierarchy dynamic. Bottom line — consumers prioritize their payments based on product preference when they find themselves constrained financially. In that sense, loan defaults have always been strategic.”

A noteworthy exception was seen in credit cards where a slight increase in delinquencies occurred when consumers delayed the opening of the new tradeline. The delinquency changes were minimal between accounts opened seven to 11 months later (18.5 percent) and 12 or more months later (18.7 percent). “While we do not discount these results, we do not consider them conclusive given the remainder of the findings,” said Chaouki.

“This study is critical in that it sheds more light on consumer behavior in a challenging economy,” said Becker. “The analysis of consumer
preferences between products and how they manage and prioritize them is important information lenders need to leverage to effectively manage their customer relationships. This study affords lenders greater insight into consumer performance, hopefully leading to a more mutually profitable, long-term relationship between lender and borrower.”

Study Methodology:

The study reviewed data from a random sample of five million consumers with an open mortgage trade in January 2008. From this sample, TransUnion looked at a subset that had at least one non-mortgage trade open as of December 2007, went 120+ days delinquent on the mortgage trade between January 2008 and June 2009 and opened at least one additional trade after the mortgage went delinquent. This left the final sample size of approximately 129,000 new accounts for analysis. The sample was studied through a performance window of 12-17 months.

TransUnion evaluated the product mix of these consumers post-foreclosure, calculated each consumer’s VantageScore in the month prior to the new tradeline opening and evaluated the delinquency rates of those new trades with 12-17 months of performance through August 2010.

About TransUnion

As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion has employees in more than 25 countries on five continents.

Full study below…

You can also check out the USA Today article on the report here…



Life After Foreclosure

10 Responses to “TransUnion Study – Life After Foreclosure | Mortgage-Only Defaulters are NOT Deadbeats”
  1. Bobbi Swann says:

    I think this is all just a ruse on the banks once again to get all those so-called innocents who live in glass houses to enter the market. I am a mortgage broker ( and one BTW who did not sell that garbage 4 yrs ago) and I keep seeing the guidelines keep creeping downwards. The past 2 years it has been a minimum of 680 credit score to get a mortgage, no lates, no collections – pristene credit. Now, lately I am seeing those guidelines drop to 620 and more recently some of them going down to 500 score. The word in gossip is that subprime lending is making a comeback with the lenders and probably because they have so much profit in the last two years and need to dump it into the market. This article only goes to show that they are just pumping up the market and ready to attack. Nowadays I spend more time educating my clients on what they truly can afford rather than what they “want”. Sometimes it’s a matter of decision of whether they truly want that brand new car or a home and to always consider a possible loss of income in the family should it ever happen. I don’t want to see this crisis repeated a 2nd time but I fear that too many are uneducated on the consequences of certain loan programs being offered by the banks. The old term “buyer beware” shoud be more prominent than ever.

    • l vent says:

      Thanks for your honesty, Bobbi Swann. The fact that the same criminals are trying to get their PONZI SCHEME criminal enterprise rolling again by lowering lending standards yet again in order to move markets is not surprising. This proves the same criminals who created the housing meltdown and intentional financial crisis are still making Liars Loans and need to go to prison. Are Fannie and Freddie who are backing these Liars Loans with their same broken business model? This is manical and diabolical and completely out of control. Others in your field would be doing everyone including themselves a favor by coming forward with this information and giving it to the proper authorites. Only honest people with integrity are going to save America from more debt destruction.

  2. I want one of those t-shirts

  3. Dan says:

    We are good risks because responsible Americans own homes. People that aren’t afraid of a commitment and want their children to have something. We didn’t want this but some of us were forced into it by illegal impound accounts such as what they did to me. They did this to us to meet THEIR monetary goals.
    Hangin em High

  4. Readdocs says:

    Anyone who would fall for this crap again is truly a rube.

  5. John R says:

    OR… is this the first in a series of BS articles, written and published by the Lenders with the end goal in mind of “doing it again”! As in, they weren’t all that bad, let’s give em loans again so we can sell more derivatives and rake in more huge profits… after all… if we kill all the geese, who’s gonna be there to lay the golden eggs? Ya gotta remember, if the wealthy have no one to sell to, then they’re stuck with their crap… so they need the middle class. And if the middle class have no one to sell to.. then they’re stuck with their crap! It’s the crap that trickles down… not the money. Wall Street has an appetite from Hell and they need us all to participate or they starve. So it’s line em up, take em down, line em up, take em down, line em up… you get my meaing? Only time will really tell but I’m old enough to say, I’ve seen this all before. The first step in lining them up… is fill em full of BS. It makes em easy to set up for the shakedown to come.

  6. Pamela says:

    Thats right we still pay all our other bills and if it hadn’t been for unforseeable circumstances i.e. medical emergencies and job loss we would still be paying all those illegal mortgages that the pretender lenders never had a right to collect on.It’s about time someone figured this out and started giving credit where credit is due.The banks act like this was a strategy move on most of our parts which it was not on most.It’s time the record was set straight.

    • more and more lies says:

      HELLO IS THERE ANYBODY IN THERE??????? THE BANKS TOLD AT LEAST 50% OF US THAT WE COULD NOT GET HELP UNLESS WE WERE IN EMINENT DEFAULT. THEY TOLD US NOT TO PAY THE MORTGAGES. THE BANKS DID NOT TELL US NOT TO PAY OUR CAR PAYMNENT, ELCECTRIC BILL AND CREDIT CARD PAYMENT???? ok sorry for the all caps just venting sick of this incompetant crap. i am sick that our Ags are allowing these servicers to abuse us. there has to be a point where abuse and fraud end and helping the middle class survive. how does a deadbeat RN work 14 hr shift???? last summer sept 2011 my husband got sick and i was underemployed we are not deadbeats. i am tires of this whole thing. please all write your Ag, occ< YOUR LOACAL SENATOR , THEY CAN NOT HELP US BUT THEY WILL KNOW WE ARE UPSET AND THE FRAUD . THANKS SICK TO MY STOMACH AND WANT TO PUKE!!!!!!

      • AliceN.Wuinderland says:

        Correct. That is exactly what they said. Don’t pay your mortgage payments for three months and we will help you. How sick is that. The people did what they were told to do by their upstanding mortgage servicer. Why not pay the rest of the bills while you don’t make the payment that the lender tells you not to make, they can’t have it both ways or can they…guess they can..they all have credit cards don’t they and so they get those payments instead of housepayments…I just don’t know what to say anymore……….

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