Home finance balance write-offs drop
Home finance balances written off in the first quarter of 2013 totaled $43.3 billion, down nearly 23% from $55.4 billion a year earlier, credit reporting agency Equifax said Tuesday.
According to the Equifax March National Consumer Credit Trends Report, this marks a five-year low in the number of home finance balances classified as bad debts to be written off.
The loans included in the calculation are debts extinguished through foreclosure, pushed into REO status, or discharged through bankruptcy or otherwise written off by the lender.
The year-over-year change in home finance write-offs from March 2012 to 2013 included home equity revolving lines (dropping 44.1%), home equity installment (falling 32.9%) and first mortgages (down 17.6%).
Dollar-wise, the year-over-year change in home finance severely delinquent balances looked like this: home equity revolving ($13.6 billion to $9.7 billion), home equity installment ($6.6 billion to $4.9 billion) and first mortgages ($477 billion to $355 billion).
"Overall home finance balances decreased to $8.38 trillion in March 2013 from $8.64 trillion the same time a year ago," said Equifax Chief Economist Amy Crews Cutts.
She added, "The decline is due to write-offs from foreclosures as well as from consumers paying down balances when refinancing, known as cash-in refinancing, shortening terms when they refinance their loans or making extra principle payments each month for faster amortization; some have even paid-off their mortgages entirely."
More than 65% of the severely delinquent balances among first mortgages are sourced from originations launched from 2005 to 2007, the report said.
Of severely delinquent balances, 73% are tied to lines of credit opened from 2005 to 2007. Home equity loans with balances 90-days past due or in foreclosure are considered severely delinquent.
Cutts noted that the share was evenly split until recently when it shifted to a 60-40 split with write-offs dominating.
"This shift is important as increased home purchases are finally leading to more demand for mortgage credit and may soon stop the decline in mortgage debt outstanding," said Cutts.
From March 2012 to 2013, total existing loans dropped from more than 4.5 million to 4.2 million, with total balances also declining 8% from $148.1 billion to $136.6 billion.