Equifax’s latest National Consumer Credit Trends Report shows a combination of improving payment behavior and decreasing delinquencies have brought some stability to the mortgage market.
Home finance write-offs through May 2013 dropped to a five-year low of $69.7 billion, down more than 23% year-over-year from the $90.8 billion reported in 2012 and almost 45% compared to the 2010 peak of $126 billion.
Declines in home finance write-offs and mortgage delinquency rates indicate a new market shift, despite concern over “the high volume of existing severely delinquent loans, otherwise known as the shadow inventory,” according to Equifax chief economist Amy Crews Cutts.
In May 2012 the 30-day first mortgage delinquency rate decreased more than 22% year-over-year to 6.4% from 8.26% in May 2013.
During the same period the home equity revolving delinquency rate decreased more than 22% from 3.43% to 2.67% and the home equity installment delinquency rate dropped 18% from 6.39% to 5.24%.
As to the over 30-day delinquency rate, the lasting effect of the crisis is still significant.
In the home equity revolving universe up to 73% of severely delinquent balances of are from loans opened 2005-2007. Similarly, 65% of severely delinquent first mortgage loan balances also are from 2005-2007 loans.
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Positive factors include still low mortgage rates at 4% on 30-year fixed-rate mortgages “that are supporting strong refinance activity” and keeping home purchasing affordable.
As a result originations of new first mortgages have failed to keep pace with write-offs and pay-offs, she said, while new consumer credit, excluding first mortgages, in the first quarter of 2013 increased 45% compared to the year-to-date low in the first quarter of 2010.
Year-over-year the total number of new home equity revolving loans in the first quarter increased more than 10% to 211,000, bringing the total balance of new credit up 15% from $17.6 billion to $20.2 billion, marking four-year highs.
Meanwhile, there is no shift in agency versus nonagency originations.
Agency-funded first-mortgage balances increased 4.5% from $3.75 trillion in May 2012 to $3.91 trillion in May 2013 while nonagency-funded first-mortgage balances decreased 7.7% from $4.13 trillion to $3.81 trillion.
