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TransUnion sees brighter future for isle credit

Kristen Consillio

Hawaii will see mortgage and credit card delinquencies drop next year as the economy continues to recover.

That’s the forecast from credit reporting agency TransUnion. The company predicts the state’s 60-day mortgage loan delinquency rate, considered a precursor to foreclosure, will decline to 4.05 percent from 5.2 percent this year. Hawaii’s 60-day mortgage loan late payment rate peaked in the second quarter at 5.71 percent. The national rate peaked at 6.87 percent in the fourth quarter of 2009.

Meanwhile, Hawaii’s 90-day credit card delinquency rate is expected to drop to 0.53 percent — approximately half of what it was at the start of the recession in the fourth quarter of 2007 — from 0.59 over the next year.

"Hawaii as a state is forecast to do well relative to the average — definitely better than most," said Steve Chaouki, group vice president in TransUnion’s financial services business unit.

However, while the rest of the nation has pulled back on using credit cards, Hawaii has not.

"People are doing more mail order. It’s a more expensive place to live. People are charging more money," Chaouki said.

Hawaii has the second-highest average credit card debt — $5,716 per person — among the 50 states and the District of Columbia. However the state ranked No. 8 in terms of fewest delinquencies. That "implies to me that you can pay your balances in Hawaii," Chaouki said.

"Historically, it’s a combination of cultural values and frankly local values — we generally have been a very diligent community in terms of taking care of debt," said Honolulu bankruptcy attorney David Farmer. "That ethic is still out there. I still see people in Chapter 7, it breaks their hearts to be there — they try everything to avoid it."

Nationally, the agency is predicting the number of mortgage payments late by more than 60 days will drop to 4.98 percent at the close of 2011 from 6.21 percent this year. That’s still well above what is considered normal delinquency rates at between 1.5 percent and 2 percent, Chaouki said.

Meanwhile, TransUnion expects credit card late payments to drop to approximately 0.67 percent by the end of 2011 over the next year from 0.75 percent at the end of this year. That would be the lowest rate in 15 years.

TransUnion says the improvement in debt payments next year will be due to:

» unemployment stabilizing,
» housing market stabilizing, and
» newer mortgages that have been underwritten to a higher standard.

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