The good news is the rate of late payments is falling. The bad news is that at the current rate it will take 8 years to get to normal.

TransUnion finds Late payments on mortgages fall again in 1st quarter

The number of homeowners making late payments — or no payments — on their mortgages fell for the fifth straight quarter in the first three months of 2011. But the figure remains stubbornly high compared with the pre-crisis norm, likely because of the huge backlog of homes waiting to be foreclosed.

The rate of borrowers nationwide who were 60 days or more past due on their mortgage payments fell to 6.19 percent for the three months ended March 31, according to credit reporting agency TransUnion. That was down from 6.77 percent at the same time last year.

Delinquency rates were highest in Florida, at 14.37 percent, down from 14.65 percent a year ago, followed by last year’s leader, Nevada, at 14.19 percent, down from 15.98 percent.

Arizona was next, at 9.14 percent, compared with 10.94 percent in the 2010 first quarter. California, fourth at 8.58 percent, showed the biggest drop of any state in the past year, falling from 10.68 percent. These four states were the hardest hit by the housing meltdown.

If delinquency continues to improve at its current pace, Martin said rates won’t return to normal for another 8 years. “It just gives you a sense for how high these rates are, historically speaking, and how far we have to go at this kind of slow improvement pace,” he said. TransUnion expects rates to continue drifting down through the rest of the year.

Improvement is a Mirage

Much if not all of the improvement is a mirage. After foreclosure, people no longer have to make payments and are no longer late. Thus, the improvement to a certain extent reflects the number of foreclosures.

If everyone 90 days or more late lost their home to foreclosure tomorrow, we would see a stunning drop in the late payments category as well as a stunning rise in bank REOs.

Mike “Mish” Shedlock
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