Delinquency Rate Falls Below 3 Percent for First Time Since 2007
The percentage of residential mortgage borrowers who are delinquent (more than 60 days behind on their mortgage payments) was reported at 2.95 percent in Q1, the first time it has been below 3 percent in more than seven years, according toTransUnion's Quarterly Industry Insights Reportreleased Monday.
Q1 marked the 13th consecutive quarterly decline in mortgage delinquency rate. Q1's percentage of 2.95 was a drop from 3.29 percent in Q4 2014 and from 3.59 percent in Q1 2014. Before Q1, the mortgage delinquency rate had not been below 3 percent since Q3 2007 (immediately prior to the beginning of the recession), when it was reported at 2.61 percent.
Subprime consumers had a delinquency rate of 27.23 percent in Q1, a decline of 9 percent year-over-year; it was reported at 29.7 percent for Q1 2014. The delinquency rate for both subprime consumers and all consumers peaked in Q1 2010 at 40.5 percent and 6.9 percent, respectively.
"It's taken more than seven years, but the mortgage delinquency rate has reached pre-recession levels. We continue to see a steady decline in the mortgage delinquency rate, primarily driven by strong performance by newer vintage loans," said Joe Mellman, vice president and head of TransUnion's mortgage group. "It's also encouraging to see continued delinquency rate declines for the subprime and near-prime risk groups."
According to TransUnion's report, every state reported a year-over-year decline in mortgage delinquency rate, and most metro areas reported a substantial decrease. In Miami, the delinquency rate declined by 36.1 percent down to 6.15 percent, and in San Francisco, it fell by 31.1 percent down to 1.32 percent.
"It's a positive sign to see double-digit percentage delinquency declines in major markets across the country, as it demonstrates the improvements are widespread -- not just a regional phenomenon," Mellman said.
While mortgage loan delinquencies were down, mortgage balances per consumer were up, according to TransUnion. In Q1 2015, the average mortgage loan balance was $187,175, up from $187, 139 the previous quarter and from $186,836 for Q1 2014. The number of mortgage accounts declined in Q1 to 53.0 million, representing a drop of about 400,000 from Q4 2014 (53.4 million). By comparison, in Q1 2009 there were 61.6 million mortgage accounts nationwide (about nine million more than in Q1 2015).
Subprime and near-prime mortgage consumers held about 32 percent of the balances they held in early 2010 at the peak of the financial crisis, according to TransUnion, whereas prime, prime plus, and super-prime consumers held about the same amount of mortgage balances as they did in early 2010.
Mortgage originations in Q4 2014 (viewed one quarter in arrears to ensure all mortgage accounts are included) were down by 6.7 percent on a quarter-over-quarter basis, totaling 1.45 million or the quarter. That number represented an increase of 3.8 percent year-over-year, however. Mortgage originations jumped year-over-year in all risk tiers, let by super prime (5.1 percent). Jumbo loan activity was the primary driver for the spike in super prime mortgage originations in Q4, according to TransUnion.