Decreasing Delinquencies Stabilizing Home-Finance Sector

Decreasing Delinquencies Stabilizing Home-Finance Sector

July 1, 2013

According to Equifax’ latest National Consumer Credit Trends Report, home finance write-offs year-to-date through May 2013 total $69.7 billion, a five-year low, and a decrease of more than 23 percent year-over-year ($90.8 billion YTD in 2012) and almost 45 percent lower than the high set over the first five months of 2010 ($126 billion). Conversely, non-home finance write-offs total $33.9 billion year to date through May 2013, a year-over-year increase of three percent from $32.8 billion.
In addition, year-over-year changes in home finance 30-day delinquency rates in May 2012 versus May 2013:
►First mortgage: decreased more than 22 percent (from a rate of 8.26 percent to 6.40 percent);
►Home equity revolving: decreased more than 22 percent (from 3.43 percent to 2.67 percent);
►Home equity installment: decreased 18 percent (from 6.39 percent to 5.24 percent)
"Improving payment behavior and decreasing delinquencies has brought some stability to the home-finance sector. While there is still concern over the high volume of existing severely delinquent loans, otherwise known as the shadow inventory, rising home values are bringing more and more borrowers into positive equity and decreasing the likelihood that they will fall into trouble," said Equifax Chief Economist Amy Crews Cutts. "Low mortgage rates, though recently rising to a two-year high of 4.0 percent on 30-year fixed-rate mortgages, have supported strong refinance activity and pushed homebuyer affordability to new highs."
"Originations of new first mortgages have failed to keep pace with write-offs and pay-offs, but other tradelines are seeing rising total balances and growth in accounts. Total new consumer credit, excluding first mortgages, in the first quarter of 2013 is 45 percent higher than same time in 2010, the recent year-to-date low point. Auto loan origination activity continues outpacing other verticals, accounting for nearly half of the total new credit dollars originated in the first quarter of 2013."
Other highlights from the most recent data include:
First Mortgage
►65 percent of severely delinquent balances are from loans opened 2005-2007.
►Year-over-year, agency funded first mortgage balances increased 4.5% from $3.75 trillion in May 2012 to $3.91 trillion in May 2013.
►Conversely, non-agency funded first mortgage balances decreased 7.7% in the same time, from $4.13 trillion to $3.81 trillion.
Home Equity Revolving
►The total number of new loans in Q1 2013 are 211,000, a year-over-year increase of more than 10 percent.
►Year-over-year, the total balance of new credit increased more than 15 percent in that same time, from $17.6 billion to $20.2 billion.
►Both new loans and new credit for Q1 2013 are four-year highs for that time period.
►73 percent of severely delinquent balances are from loans opened 2005-2007.

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