Delinquencies are down, but riskier mortgage lending may mean trouble

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Other than in areas hit by natural disasters, delinquency rates are falling with help from a healthier labor market, but a rise in riskier lending habits could signal trouble for borrowers should housing conditions change, according to CoreLogic.

About 4.4% of mortgages were in some stage of delinquency in September, down from 5% a year ago. The foreclosure inventory rate, measuring loans in some stage of foreclosure, held steady since April at 0.5% and declined by 0.1 percentage point from a year ago to the lowest reading for any month in 12 years.

The serious delinquency rate fell to 1.5% from 1.9% in September to the lowest level for any September since 2006.

"Outside of areas affected by natural disasters, serious delinquency and foreclosure rates have declined steadily across the nation as the labor market has improved and home prices have risen," Frank Martell, president and CEO of CoreLogic, said in a press release.

"However, we have also seen a rise in high loan-to-value and high debt-to-income lending in our CoreLogic TrueStandings data, heightening the risk of a significant upturn in loan default if the economy slips into recession or home prices decline," he said.

The share of mortgages that transitioned from current to 30 days past due ticked down to 1.2% in September from 1.3% for the same period a year ago. For reference, the transition rate was 1.2% in January 2007 just before the start of the crisis, and peaked at 2% in November 2008.

Despite delinquencies being down overall, local housing markets affected by natural disasters are seeing opposite results.

Of the top eight metropolitan areas experiencing the highest annual delinquency rate growth in September, seven were in North Carolina and South Carolina, which were hit hard by Hurricane Florence.

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