Home Finance Write-Offs Fall to 5-Year Low as Delinquencies Improve

Posted: July 8, 2013 in Mortgage Information

A recent National Consumer Credit Trends report filed by Equifax reveals home finance write-offs year-to-date through May reached a total of $69.7 billion. This statistic shows write-offs have hit a five-year low, with a decrease of more than 23 percent year-over-year from 2012’s $90.8 billion during the same time period.

The figure is also nearly 45 percent less than the record $126 billion during the first five months of 2010.

On the opposite end of the spectrum, non-home finance write-offs have increased 3 percent year-to-date to $33.9 billion.

Additional statistics from Atlanta-based Equifax include a comparison of home finance 30-day delinquency rates in May 2012 compared to May 2013.

The data shows first mortgages in May experienced a decrease of more than 22 percent (dropping from a delinquency rate of 8.26 percent to 6.4 percent). May 2013’s home equity revolving delinquency rate dropped from 3.43 percent to 2.67 percent, a decrease of over 22 percent. Also decreasing was the home equity installment delinquency rate, showing an 18 percent dip (from 6.39 percent to 5.24 percent).

Regarding the report’s data, Equifax chief economist Amy Crews Cutts offers some insight and explanation stating that, “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.”

Cutts goes on to state that, “Low mortgage rates, though recently rising to a two-year high of 4% on 30-year fixed-rate mortgages, have supported strong refinance activity and pushed homebuyer affordability to new highs.”

Other data covered in the report expounds upon first mortgages, showing that 65 percent of severely delinquent balances exist from those loans that were opened in the 2005-2007 year window. Also, year-over-year, agency funded first mortgage balances increased 4.5 percent to $3.91 trillion over the last year in May. Non-agency funded first mortgages however, experienced a decrease of 7.7 percent in the same time period, falling from $4.13 trillion to $3.81 trillion.

Home equity revolving loans, in particular, also had some interesting facts shown. The total number of new loans in Q1 2013 increased more than 10 percent. The total new credit balance also increased 15 percent during that same time, rising from $17.6 billion to $20.2 billion. New loans, as well as new credit for the first quarter of this year, reached four-year highs. In addition, out of all of the severely delinquent balances, a staggering 73 percent were opened from 2005-2007.

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