Why not to believe the TransUnion delinquency prediction

This TransUnion prediction of a decrease in delinquent mortgages is getting a lot of press, but no one seems to have done any kind of research to see if the company knows what it’s talking about.

image Reads the AP story, “If the U.S. economy does not suffer more setbacks, the rate of mortgage holders behind on their payments should decline significantly by the end of next year, according to credit reporting agency TransUnion.”

Unbelievably, no reporter seems to have asked the obvious question: What did TransUnion say about this year, and was it accurate?

Gosh, the reporting on this story is awful.

So here’s the facts:

TransUnion’s prediction defines “mortgage delinquencies” as when the borrower is 60 or more days late, but does NOT include foreclosures. So right off the bat it’s not a very useful number — it’s like a hospital saying that it went from 100 sick patients to only 80, but neglected to mention that eight were cured … and 12 of them died.

But if we take TransUnion’s numbers for what they are, we can still look at how it did for 2011. The answer:

2010 TransUnion prediction: A 20% decline in delinquencies (60+ or 90+ days past due) for 2011. (See also here.)

2011 reality: A 7% decline (according to TransUnion’s own figures).

2011 reality, expanded: When you include foreclosures as “delinquent,” the figure is about the same for 2010 and 2011, according to the Mortgage Bankers Association — about 9.2%.

So… a prediction last year of a 20% drop, but a reality of a 7% drop. I’d call that a miss.

(In its press release, TransUnion wrote that the predicted drop in 2012, “would follow recent yearly trends, including an expected 7% decrease by the end of this year and a 7% reduction in 2010.” What do they mean by an “expected 7% decrease”? TU expected a 20% decrease!

And in 2009? Same prediction:

After studying 27m consumer records, TransUnion predicts that the rate of mortgage delinquencies – the ratio of borrowers who are 60 or more days behind on payments – will peak in early 2010 before falling towards the end of the year.

[Delinquencies] are estimated to reach 6.56 per cent at the end of this year, and then settle at 6.39% in 2010, the Chicago-based group forecasts.

Reality: According to LPS, at the end of 2010, 8.83% of mortgages were delinquent.

And apparently 2008 was the same way.

Bottom line: TransUnion’s predictions were overly optimistic in 2008, 2009, and 2010. So take its 2011 prediction with the appropriate level of skepticism.

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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