The volume of mortgage loan write-offs, which includes loans that completed the foreclosure process and are real estate owned by banks, entered bankruptcy, or were otherwise charged off by the lender, has reached a five-year low.
The Equifax March National Consumer Credit Trends report shows that a total of $43.1 billion in mortgage loan balances was written off in the first quarter of 2013, down by nearly 23% from $55.4 billion in 1Q 2012.
Equifax chief economist Amy Crews Cutts attributed the decline in overall home finance balances to $8.38 trillion in March 2013 from $8.64 trillion the same time a year ago “to write-offs from foreclosures as well as from consumers paying down balances when refinancing.”
Opportunity to get cash-in refinancing that enables homeowners to shorten the mortgage term when they refinance their loans, or make “extra principle payments each month for faster amortization,” explains Cutts, drove the write-off volume down and even helped some borrowers pay off their mortgages.
Therefore the previous 50-50 balance “has shifted to a 60-40 split” dominated by write-offs, which is key in times when “home purchases are finally leading to more demand for mortgage credit and may soon stop the decline in mortgage debt outstanding,” she said.
By loan type, year-over-year the change in the volume of severely delinquent balances transferred into REO, otherwise known as “severe derogatories,” Cutts said, declined even more in three categories.
The volume of revolving
During the same period “severe derogatories” on first mortgages declined nearly 25% from $477 billion to $355 billion.
