NEW YORK ( TheStreet) -- Mortgage delinquency rates are likely to head lower in 2013 but the pace of decline may still be disappointing, according to TransUnion.

The national mortgage delinquency rate- the proportion of borrowers who are more than 60 days past due on their mortgage- is projected to decline to 5.06% by the end of 2013 from an estimated 5.32% at the end of 2012.

The mortgage delinquency rate- a predictor of foreclosures- stood at 5.41% at the end of the third quarter, down 21% from the peak of 6.89% in the fourth quarter of 2009.

The default rate is still well above the normal delinquency rate range of between 1.5% and 2% according to the consumer data provider. In the second quarter of 2006, the delinquency rate was 1.94%.

"As house prices and unemployment slowly improve, TransUnion's forecast indicates that the national mortgage delinquency rate will gradually drop throughout 2013," said Tim Martin, group vice president of U.S. housing in TransUnion's financial services business unit. "While we are encouraged by the direction of the forecast, we would have hoped for a projection that called for a more substantive drop in delinquencies. If the pace of improvement does not pick up, it will take a very long time to get back to 'normal' delinquency rates."

According to Martin, one reason for the elevated delinquency rate is because existing borrowers have been delinquent for a very long time.

"Our analysis shows the delinquency rate would fall to around 2.5%, or pretty much normal, if we simply took borrowers who haven't made a mortgage payment in over a year out of the calculation. By comparison, pre-recession, it was unusual for a borrower to go more than 6 months without either being able to cure their situation or go through the foreclosure process."

States that are likely to see the biggest improvements in credit quality include Nevada, Minnesota, California and Arizona, according to the company. Florida, Nevada and New Jersey have the highest delinquency rates overall.

Transunion also reported a slight uptick in credit card delinquencies, but expects the rate to remain low in 2013 at 0.87% as consumers remain overly dependent on credit cards for liquidity in the current economic backdrop.

Banks including Bank of America, JPMorgan Chase, Citigroup and Wells Fargo have been profiting from a decline in defaults by borrowers. Still, Citigroup recently indicated that it won't release its mortgage loan loss reserves just yet as it remains cautious on the housing recovery.

-- Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.