The mortgage delinquency rate declined to 2.95 percent in the first quarter of 2015, marking the first time the variable has been below three percent since prior to the recession in Q3 2007 when it hit 2.61 percent. This also marks the 13th consecutive quarterly drop in the mortgage delinquency rate (down from 3.29 percent in the fourth quarter of 2014). On an annual basis, the delinquency rate dropped nearly 18 percent from 3.59 percent in Q1 2014.
The findings were reported in the latest TransUnion Industry Insights Report, a quarterly overview summarizing data, trends and perspectives on the U.S. consumer lending industry. The report is based on anonymized credit data from virtually every credit-active consumer in the United States.
The delinquency rate for sub-prime consumers declined to 27.23 percent in Q1 2015, down nearly nine percent from 29.76 percent in Q1 2014. The delinquency rate for this group of consumers had peaked in Q1 2010 at 40.48 percent. As a comparison, the delinquency rate for all consumers had also peaked in Q1 2010 at 6.94 percent.
“It’s taken more than seven years, but the mortgage delinquency rate has reached pre-recession levels. We continue to see a steady decline in the mortgage delinquency rate, primarily driven by strong performance by newer vintage loans,” said Joe Mellman, vice president and head of TransUnion’s mortgage group. “It’s also encouraging to see continued delinquency rate declines for the subprime and near-prime risk groups.”
Every state experienced a yearly decline in their mortgage loan delinquency rate and most major Metropolitan Statistical Areas (MSAs) also saw robust drops in their delinquencies. Notable MSA declines were observed in Miami (down 36.1 percent from 9.62 percent in Q1 2014 to 6.15 percent in Q1 2015) and San Francisco (down 31.1 percent from 1.92 percent in Q1 2014 to 1.32 percent in Q1 2015).
“It’s a positive sign to see double-digit percentage delinquency declines in major markets across the country, as it demonstrates the improvements are widespread—not just a regional phenomenon,” said Mellman.
Average mortgage balances per consumer also continued to increase on both a quarterly and yearly basis to $187,175 in Q1 2015. Mortgage balances were at $186,836 at this same time last year, and at $187,139 in Q4 2014.
The share of mortgage balances held by consumers who are currently subprime and near-prime dropped by 9.8 percent and 2.9 percent respectively, which is consistent with recent years. Sub-prime and near-prime consumers currently hold only 32 percent of the total balances they held at the beginning of 2010. By comparison, prime, prime plus, and super-prime consumers hold roughly the same amount of mortgage balances as they did at the beginning of 2010.
TransUnion recorded 53 million mortgage accounts as of Q1 2015, down from 53.4 million in Q1 2014. There are nearly nine million fewer accounts as compared to Q1 2009 (61.6 million). Viewed one quarter in arrears (to ensure all accounts are reported and included in the data), Q4 2014 mortgage originations of 1.45 million accounts is down 6.7 percent on a quarterly basis, but it is up 3.8 percent since Q4 2013. Account originations in all risk tiers showed year-over-year growth, with super prime leading the way at 5.1 percent, largely driven by jumbo loan activity.
