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Mortgage lending boom? Equifax reports massive increase in home credit

Total origination balance and volume up sharply over 2014

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Contrary to some fears that the Consumer Financial Protection Bureau’s new disclosure rules would severely dampen mortgage lending in 2015, a new report from Equifax shows that exactly the opposite took place, as mortgage lending grew by a drastic margin in 2015.

According to the Equifax National Consumer Credit Trends Report for March 2016, the total balance of new first mortgages originated in 2015 was $1.82 trillion, which represents a 42.9% increase over 2014’s total of $1.27 trillion.

In other words, 2015 saw more than $546 billion in new first mortgages originated in 2015 than in 2014.

In terms of the total number of new first mortgages originated, 2015 also saw a sharp increase from 2014, albeit not quite as much as the total dollar amount.

According to Equifax’s report, there were 7.71 million new first mortgages originated in 2015, an increase of 31.6% over 2014’s total of 5.86 million first mortgages originated.

Additionally, based on Equifax’s totals, the average dollar amount of new first mortgages also rose in 2015, from $217,390 in 2014 to $236,057 in 2015, which is an increase of 8.59%.

And it wasn’t just overall new first mortgage lending that was up in 2015.

According to Equifax’s report, subprime lending also saw a large increase in 2015.

Equifax’s report categorizes subprime borrowers as those with an Equifax Risk Score of 620 or below, and the report shows that lending to those borrowers rose significantly in 2015.

According to Equifax’s report, the total balance of new first mortgages originated to subprime borrowers was $59.7 billion in 2015, an increase of 41.3% over 2014.

Equifax’s report also showed that there were more than 366,900 loans originated to subprime borrowers, which represents an increase 25.2%.

While the lending to subprime borrowers increased, it still remained a very small portion of the total amount of mortgage lending.

In terms of the dollar amount, the amount loaned to subprime borrowers represented just 3.28% of the total. And in terms of the number of mortgages, the subprime amount was 4.76% of the total number of mortgages originated in 2015.

"We saw a nice jump in mortgage lending in 2015 that was driven by both rising home-purchase activity and solid refinancing volumes," said Amy Crews Cutts, senior vice president and chief economist at Equifax.

"While low interest rates are helping, continued gains in employment and consumer confidence are key,” Cutts continued. “What we are not seeing is any meaningful loosening of underwriting, at least with respect to credit scores.”

According to Cutts, the median credit score on new first mortgages in the fourth quarter of 2015 was 750 and 90% of first mortgage borrowers had a score in excess of 646, values that are “essentially unchanged” for the last three years.

Additionally, Equifax’s report included data on home equity installment loans and home equity lines of credit.

Here’s a sampling of Equifax’s data on home equity installment loans and home equity lines of credit.

For home equity installment loans:

  • The total number of new home equity installment loans originated in 2015 more than 791,900, an increase of 26.7% from the previous year. The total balance of new loans in that same time was $26.5 billion, an increase of 20.8%
  • The total number of new loans originated 2015 was the highest level in more than seven years, while in that same time, 2014-2015 showed the third-highest percentage increase, for a calendar year since 2008
  • There were more than 83,000 new loans originated for borrowers with subprime credit in 2015, a year-over-year increase of 31.2%. In that same time, the total balance of new loans was $1.73 billion, an increase of 6.5%
  • In 2015, 10.5% of all loans were issued to subprime-credit borrowers, a slight increase from the previous year's share (10.1%)

And for home equity lines of credit:

  • The total credit limits of new loans originated in 2015 was $146.1 billion, a 19.7% increase from the previous year. In 2015, the total number of new loans originated was just under 1.39 million, an increase of 11.7% over 2014
  • There were 20,100 loans originated for borrowers with subprime-credit in 2015, an increase of 15.2% and the highest total since 2008 (35,660 loans)
  • The total credit limits on new subprime HELOCs in 2015 was $745.2 million, an 8.5% increase and the highest total since 2008 when they totaled more than $1.78 billion

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