Data Suggest Mortgage Lending to Continue to Decrease in Near Future

For the first time in five years mortgage lending growth lags behind credit cards and the fastest growing consumer credit segments in today’s market: auto financing and student loans. But according to Equifax, most probably it will be temporary.

“Consumers are reducing their debt burdens, either negatively, through foreclosures and bankruptcies or positively, through payoffs,” said Equifax’s chief economist Amy Crews Cutts.

But since payoffs are more prevalent “in most cases today,” the analyst said, mortgage balances should begin rising again over the next several months “as new home purchase loans overtake foreclosures and payoffs.”

Various factors may interfere with that case scenario, however, including costly regulatory compliance burdens that according to some reports are contributing to higher loan origination and servicing costs.

Based on data from more than 500 million consumers, Equifax’s National Consumer Credit Trends Report finds the year-over-year first mortgage debt decreased 0.9% from $7.79 trillion in July 2012 to $7.72 trillion in July 2013.

Home equity installments also decreased 4.1% from $142.3 billion to $136.5 billion in July 2013, while revolving home equity debt decreased 8.9% from $553.2 billion to $504.1 billion.

Meanwhile, the total balance of bank credit cards increased slightly from $533.3 billion in July 2012 to $536.5 billion, marking the first annual increase in five years.

Student loans and auto loans followed the same trend, increasing 11.3% (from $794.6 billion to $884.2 billion) and 10.9% (from $745.3 billion to 826.8 billion), respectively.

Despite fluctuations in volume due to the recent foreclosure and economic crisis and the slow housing market recovery, mortgage debt remains and without a doubt will continue to be the largest debt owed by American customers.

Data support analyst’s expectations the current decline is temporary.

Equifax reports the total balance of home finance write-offs year-to-date in July 2013 was $96.3 billion, down more than 22% from a year ago and the lowest since 2007.

In addition, by July 2013, year-over-year the number of first mortgages 30 days past due dropped 22% to represent 6.24% of outstanding balances, while the total balance of first mortgages 90-days past due or in foreclosure is less than $310 billion. This is a five-year low and a decrease of more than 25% from same time a year ago.