Mortgage Delinquency Rates Continue to Fall
August 23, 2018
Mortgage delinquencies in July plummeted to their lowest levels since March 2006, according to new data from Black Knight Inc., which attributed this decline to cure activity related to the 2017 hurricane-impacted markets in Texas and the Southeast.
However, Black Knight also noted that foreclosure starts rose 11 percent from June’s 17-year low to 48,300, which is the highest total recorded in three months. Much of this activity was centralized in the foreclosure referrals within hurricane-affected areas of Texas, which were up by a higher-than-average 19 percent.
Separately, TransUnion released a data report highlighting delinquency rates in the consumer credit market since the 2008 economic crisis. For the mortgage side of the consumer credit industry, TransUnion noted that serious mortgage delinquencies peaked at seven percent in the first quarter of 2010 but were at 1.67 percent in the second quarter of this year.
The proliferation of sub-prime mortgage lending in the mid-2000s, among other market factors, led to massive increases in the percentage of borrowers 60-plus days past due. The metric, which traditionally had hovered around two percent, spiked to nearly four percent by Q2 2008 and peaked at over seven percent in Q1 2010. Following the crisis, the tightening of lending standards has helped push the delinquency rate to much-improved levels. As of Q2 2018, the serious mortgage delinquency rate stands at 1.67 percent. Matt Komos, Vice President of Research and Consulting for TransUnion’s Financial Services Business Unit, noted the shrinkage of the sub-prime mortgage market helped fuel the decline in delinquencies, but he added today’s mortgage industry might be playing a bit too safe.
“In fact, sub-prime share of mortgage originations has dropped by almost 50 percent since 2008,” Komos said. “There has also been a shift in the types of products available to consumers relative to before the financial crisis, which may have also created less access for risky populations of consumers in mortgage. Conversely, the growth that we are more recently seeing in mortgages is coming from the lowest-risk consumers. There are more super prime accounts in 2018 than there were in 2008, though account volume has reduced for every other risk tier. Most recently, however, we have started to observe lenders providing greater credit access across the full risk spectrum, compared to the period 2010-2015, as the economy and housing market have recovered.”
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