TransUnion: High Credit Quality of Recent Originations Among Other Factors Driving Mortgage Delinquency Rates Lower

The mortgage delinquency rate (the rate of borrowers 60 days or more delinquent on their mortgages) continued its rapid decline, falling to 2.72% in Q2 2015. According to TransUnion (NYSE: TRU), the delinquency rate dropped 20% in the last year (3.42% in Q2 2014) and has contracted by half in just the last three years (5.39% in Q2 2012).

Millennials led the overall decline in mortgage delinquencies as those consumers under the age of 30 experienced a yearly drop of 26.9% from 2.32% in Q2 2014 to 1.70% in Q2 2015.

These, along with the below findings, were reported in the latest TransUnion Industry Insights Report, a quarterly overview summarizing data, trends and perspectives on the U.S. consumer lending industry. The report is based on anonymized credit data from virtually every credit-active consumer in the United States.

Forty-eight states and all of the top 10 largest major metropolitan statistical areas (MSAs) saw double-digit year-over-year declines in seriously delinquent balances. Miami (down 40% from 8.87% in Q2 2014 to 5.31% in Q2 2015) and Los Angeles (down 29.1% from 2.62% in Q2 2014 to 2.07% in Q2, 2015) experienced the largest percentage declines.

Viewed one quarter in arrears (to ensure all accounts are reported and included in the data), TransUnion found that mortgage originations (by loan count) in Q1 2015 increased to 1.48M, up 2.4% quarter-over-quarter and nearly 40% on a year-over-year basis.

Year-over-year growth (by loan count) was attributed to strong growth in Prime Plus and Super Prime originations, increasing 42.8% and 56.0%, respectively. Much of this loan growth could be attributed to jumbo loan counts, with originations for this group jumping from 46,270 in Q1 2014 to 62,666 in Q1 2015.

Mortgage originations (by loan count) to Subprime and Near Prime consumers also saw year-over-year double-digit growth of 13.3% and 22.4%, potentially signaling a slight loosening of credit.

“We believe a major reason for the increase in mortgage originations was due to falling mortgage interest rates,” said Mellman. “The growth in jumbo loans for the Prime Plus and Super Prime risk tiers was another key driver. Despite this increase, it should be noted that there were 1.1 million fewer mortgage originations this past quarter compared to the pre-recession high in the third quarter of 2007.”

Average mortgage balances per consumer also continued to increase on both a quarterly and yearly basis to $188,237 in Q2 2015. Mortgage balances were at $186,999 at this same time last year, and at $187,175 in Q1 2015.

The largest mortgage balance growth in the last year was observed in the Super Prime risk category, with balances rising 2.5%. The Prime risk group also increased by 0.5% while Prime Plus remained approximately the same.

Both Subprime (-2.9%) and Near Prime (-1.0%) experienced mortgage balance declines. As a result, the share of mortgage balances held by non-prime consumers dropped from 20.9% in Q2 2014 to 19.7% in Q2 2015.

This information is reported by TransUnion and is part of its ongoing series of quarterly analyses of credit-active U.S. consumers and how they are managing credit related to mortgages, credit cards, and auto loans.

Q2 2015 Mortgage Statistics – Consumer-Level Delinquency Rates

Q2 2015 Mortgage Statistics – Average Balance per Borrower