Black Knight: Delinquencies Kept Falling In September
The U.S. mortgage delinquency rate stood at 4.27% in September – an increase of 0.74% compared with August but a decrease of 12.24% compared with September 2015, according to Black Knight Financial Services’ “First Look” mortgage report.
September’s less-than-1% seasonal increase in the delinquency rate was relatively mild by historical standards, the firm notes.
As of the end of September, about 2.165 million residential properties were delinquent – i.e., 30 days or more past due but not in foreclosure. That’s an increase of about 14,000 properties compared with August but a decrease of about 292,000 compared with September 2015.
About 668,000 properties were in serious delinquency – i.e., 90 days or more past due but not in foreclosure. That’s a decrease of about 1,000 compared with the previous month and a decrease of about 149,000 compared with a year earlier.
Black Knight notes that delinquencies in September were highest in the oil states, with Alaska and Wyoming seeing the largest increases over the past six months.
The total U.S. foreclosure presale inventory stood at about 1.0%, a decrease of 3.38% compared with August and a decrease of 31.23% compared with September 2015.
As of the end of the month, there were about 509,000 homes in the foreclosure inventory – a decrease of about 18,000 compared with August and a decrease of about 228,000 compared with September 2015.
The firm says the rate of all mortgages that are in active foreclosure fell to its lowest point in nine years.
The monthly prepayment rate stood at about 2.03%, a decrease of 5.82% compared with August but an increase of 2.47% compared with a year earlier. Black Knight notes that despite decreasing from August, September saw the third-highest prepayment rate in three years.
There were about 61,700 foreclosure starts – a decrease of 10.32% compared with the previous month and a decrease of 22.78% compared with a year earlier.
Survey Shows HELOC Reset Storm Could Be Approaching
Will the resetting of millions of home equity lines of credit (HELOCs) over the next couple of years result in a wave of defaults?
That’s a question many people in the mortgage industry have been wondering for the past several years. And although it is mostly hinged on the overall health of the economy, a new report from TD Bank shows that the threat of a HELOC default tsunami is very real.
The survey shows that many HELOC borrowers don’t even know the reset date described in their contracts despite communications from lenders. In fact, only 19% of respondents understand that a HELOC reset will increase their monthly payments, and more than half (53%) don’t know the impact the reset will have on their monthly payments.
TD Bank polled 800 borrowers with HELOCs to arrive at the findings.
“Many HELOCs allow borrowers to draw for 10 years and make interest-only payments,” says Mike Kinane, senior vice president of home equity for TD Bank. “When this draw period ends, borrowers are required to pay principal and interest, which may increase their monthly payments. It’s important that HELOC borrowers plan ahead and review their contract to determine the best course of action based on their current and future financial situations.
“If borrowers do not have a financial plan for the end of their draw period, they should contact their lender as early as possible,” Kinane adds. “A responsive lender will offer multiple ways for you to pay down your line of credit.”
S&P/Experian: Default Rate On First Mortgages Fell Again In September
The default rate for first mortgages continued to fall in September, reaching a new recent low of 0.67%, down from 0.68% in August and down from 0.76% in September 2015, according to the S&P/Experian Consumer Credit Default Indices.
Meanwhile, the auto loan default rate stood at 1.05%, up four basis points from August, and the bank card default rate hit a seven-month low, at 2.76%, down 10 basis points.
The composite default rate was 0.84%, down from 0.85% in August and down from 0.89% in September 2015.
“Data from the Federal Reserve shows that consumer credit outstanding continues to expand,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “After increasing by 7.2 percent in 2014 and 7.0 percent in 2015, growth this year is running at an annual rate of six percent to seven percent. Despite the continued growth in total consumer credit extended and the currently very low interest rates, we are not seeing any deterioration in consumer credit defaults. Rather, the default rates for major categories and for the five cities highlighted in this report continue to drift down to the lowest figures seen in 12 years.
“Among the factors supporting the favorable trends in consumer credit defaults are the economy’s underlying growth and continuing gains in employment, increases in personal income, and low inflation,” Blitzer adds. “A rare decline in mortgage debt outstanding and slower growth in consumer credit following the 2007-2009 recession contributed to improvements in consumers’ financial condition, which has been sustained in the last few years.”
ABA: Delinquency Rate For Home Equity Loans Improved In Q2
The delinquency rate for home equity loans (30 days or more past due) was about 2.70% in the second quarter – a decrease of four basis points from 2.74% in the first quarter, according to the American Bankers Association’s (ABA) Consumer Credit Delinquency Bulletin.
Delinquencies on home equity lines of credit, however, increased six basis points to 1.21% of all accounts, while delinquencies on property improvement loans increased two basis points to 0.91% of all accounts.
The report covers delinquencies in 11 individual loan categories.
“Consumers have become more confident over the past two years, and for good reason – their financial picture is improving and their paychecks have finally started to rise as we near full-employment levels,” says James Chessen, chief economist for the ABA, in a statement. “Quarter after quarter, consumers continue to build a stronger balance sheet as they earn more, save more and keep debt levels low relative to income.
“Small ups and downs are expected, but improvement is still very much in the cards for home-related delinquencies,” Chessen adds. “Rising home prices have restored equity, providing even more incentive for borrowers to stay current with their payments.”
Bank card delinquencies edged up one basis point to 2.48% of all accounts in the second quarter but remained significantly below their 15-year average of 3.70%.
“Card-related delinquencies have remained remarkably low, even as purchase volumes increase,” Chessen says. “Consumers have learned the lessons of the past and have taken a highly disciplined approach that allows them to consistently pay off or pay down debt.”
Chessen anticipates little fluctuation in delinquency levels as the economy continues its climb and consumers remain financially disciplined.
Serious Delinquencies On GSE Loans Fell To Lowest Level Since 2008
The delinquency rate (30 to 60 days past due) on mortgage loans held by Fannie Mae and Freddie Mac was about 1.36% as of the end of the second quarter – up from 1.21% as of the end of the first quarter, the Federal Housing Finance Agency reports.
However, the serious delinquency rate (90 days or more past due) was about 1.23%, down significantly from 1.35% in the first quarter, to reach the lowest level since the start of conservatorships in 2008.
About 377,781 Fannie and Freddie loans were delinquent in the second quarter compared with 337,335 as of the end of the first quarter.
About 340,741 loans were seriously delinquent compared with 375,325 in the first quarter.
The government-sponsored enterprises completed 48,438 foreclosure prevention actions in the second quarter, bringing the total to more than 3.7 million since the start of the conservatorships.
Of these actions, more than 3 million have helped troubled homeowners stay in their homes, including nearly 2 million permanent loan modifications.
The share of modifications with principal forbearance as of the end of the second quarter remained at 19%.
Modifications with extend-term only accounted for 47% of all modifications in the first quarter due to improved house prices and a declining Home Affordable Modification Program-eligible population.
About 55,100 foreclosure starts were commenced during the second quarter – a decrease of 9% compared with the first quarter.
There were about 23,348 foreclosure sales in the second quarter – a decrease of about 6%.
In addition, Fannie and Freddie’s real estate owned inventory declined 13% in the second quarter to 57,937 units, as property dispositions continued to outpace property acquisitions.
New Tool From CA Helps Servicers Measure Default Risk By Neighborhood
New research shows that analysis at the neighborhood level can lead to a more thorough insight into mortgage risk and better lending decisions.
As such, Collateral Analytics (CA), a provider of automated valuation solutions and real estate analytic products for mortgage lenders and servicers, has created new definitions for more than 300,000 neighborhoods throughout the U.S. – along with their corresponding names and shapefiles.
“We have found that these neighborhood metrics have considerable influence over the direction of home prices, the uncertainty behind value estimates of price and mortgage default rates,” says Michael Sklarz, president and CEO of CA, in a release. “These new neighborhood-level risk ratings are a result of our proprietary research and unique data sources.”
Recent research from the company shows that neighborhoods with more variability by age or size tend to be more difficult to value. This, in turn, can lead to higher appraisal costs and longer turn times.
In addition, default rates tend to be higher in neighborhoods with a propensity for more debt as a percentage of value – which makes foreclosure contagion a real risk. For this reason, CA says mortgage servicers will be equally interested in this new offering.