Mortgagors continued to pay down their residential loans in the second quarter, a trend that reduces their debt load but also spells potential trouble for mortgage banking firms that earn processing fees on such balances.
According to exclusive survey figures compiled by National Mortgage News and the Quarterly Data Report, servicing balances nationwide fell to $9.77 trillion at June 30, the second consecutive quarterly decline.
Servicing balances peaked out at $10.13 trillion at December 31 of last year. The figure includes both first and second liens and excludes multifamily loans on five or more rental units.
Historically, mortgage debt outstanding hardly ever declines, but the housing bubble and the recession has changed the way consumers are spending and saving money.
Amy Crew Cutts, deputy chief economist for Freddie Mac, told NMN that not only are some consumers paying down their balances when they refinance — to achieve a better rate — but foreclosures are removing defaulted mortgages from the calculations.
"We're seeing a lot of 'all-cash' purchases [of homes]," she said. Relying on figures compiled by the National Association of Realtors, she noted that in some cases 20% to 30% of home purchases are "all-cash" deals, involving investors that buy homes at foreclosure auctions at deep discounted prices. (For the full story see the weekly edition of NMN.)
