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Mortgage delinquency keeps falling, drops for 19th straight quarter

But one generation shows higher delinquency levels than the rest

The mortgage market performed well in the first quarter of 2018, seeing the 19th consecutive decrease in annual mortgage delinquencies, according to the Q1 2018 Industry Insights Report from TransUnion.

The serious mortgage delinquency rate, or those at least 60 days or more past due, decreased to 1.74% in the first quarter. This is down from 2.07% in the first quarter of 2017, marking the 19th straight annual drop since the third quarter of 2013.

Back in February, TransUnion announced the serious mortgage delinquency rate decreased in the final quarter of 2017 to the lowest point since the great recession.

“The opening quarter of 2018 was more of the same on the mortgage delinquency front,” said Joe Mellman, TransUnion senior vice president and mortgage business leader. “Borrowers continue to perform well, making on-time payments that are more in line with traditional patterns observed prior to the mortgage crisis. It is also encouraging that balances continue to increase, as new purchase originations outpace paydowns.”

“As time passes from the housing bubble and mortgage loan performance continues to remain exceptionally low, non-prime borrowers may begin to see their access to mortgage credit open up,” Mellman said. “However, it’s likely that mortgage lenders will approach the non-prime market cautiously, incorporating new alternative data sources to determine which non-prime borrowers offer the least risk. We will also monitor the forbearance population in areas affected by last year’s hurricanes to better understand that dynamic and its influence on the region’s mortgage market.”

And while mortgage delinquencies dropped for all generational groups, one generation stands above the rest as having a higher serious delinquency rate. Gen Xers.

Gen Xers, or those born from 1965 to 1979 had a serious delinquency rate of 2.16% in the first quarter. It may be a higher delinquency rate than other generations, but it is still down 16.6% from last year.

The generation with the next highest delinquency rate was the Silent Generation, or those born up until 1945, whose delinquency rate fell 8.9% annually to 1.74%; followed by Baby Boomers, or those born from 1946 to 1964, who fell 16% to 1.52%; Millennials, those born from 1980 to 1994, who fell 14.5% to 1.41% and Gen Z, or those born from 1995 on, who fell 3.2% to 1.2%.

TransUnion explained that while reported delinquencies dropped, the hurricanes in the third quarter of last year drove an interesting dynamic related to the number accounts in forbearance, which are typically reported as current to credit reporting agencies regardless of their actual payment status.

In Houston, Miami, and Tampa, which were all heavily affected by the hurricanes, the report showed only 1,800 out of a total 2.36 million active mortgages reported being in some form of forbearance in the second quarter last year. But by the end of the first quarter of 2018, that number surged to 164,000 mortgages.

As refinances decline, the average new mortgage balances, which is reported one quarter in arrears due to a reporting lag, decreased from $235,361 in the fourth quarter of 2016 to $229,538 in the fourth quarter of 2017.

Average debt per borrower, however, increased from $196,772 the first quarter of 2017 to $202,470 in the first quarter of 2018.  

The number of mortgage loans originated increased from 52.8 million in the first quarter of 2017 to 53.1 million in the first quarter of 2018.

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