Equifax: Debt Climbs for First Mortgages, but Declines in Home Equity Lending

Equifax, Atlanta, reported the total balance of outstanding first mortgages rose to more than $8.3 trillion in January, a 2.1 percent increase from a year ago.

At the same time, the Equifax National Consumer Credit Trends Report said the total outstanding balance for home equity loans continued its steady decline; Home Equity Lines of Credit fell by 3.7 percent to $495 billion from $514.2 billion a year ago, while home equity installment loans decreased by 5.1 percent, from $138.5 billion to $131.4 billion.

Amy Crews Cutts, chief economist with Equifax, said home purchase activity accelerated as economic conditions boosted consumer confidence. “When first-time home buyers move into homeownership or existing homeowners upgrade to a larger, more expensive home, new debt is created,” she said. “This trend is finally dominating the accelerated amortization from borrowers paying a little extra each month or paying their mortgages in full, and foreclosure activity is also greatly diminished.”

Cutts noted many HELOCs hit their recast into amortization, resulting in increased payoffs, reducing the debt and numbers of HELOCs outstanding. “About 20 to 25 percent of HELOCs active a year prior to their recast anniversary will pay-off and close within the year after date,” she said. “Originations of new loans are not keeping pace with the payoffs.”

Equifax reported the total number of existing first mortgages is 50.1 million, an increase of 0.4 percent from a year ago. In that same period, HELOCs and home equity installment loans declined by 3.2 percent and 2.5 percent, respectively.

First Mortgages
–The severe delinquency rate (as a share of balances 90-days past due or in foreclosure) fell to 1.75 percent, down from 2.50 percent a year ago;
–First mortgages originated January-November 2015 rose to 7.60 million, a year-over-year increase of 43.2 percent; and
–Total balance of first mortgages originated in that same period rose to $1.79 trillion, an increase of 56.7 percent.

Home Equity Installment
–The severe delinquency rate (as a share of balances 90-days past due or in foreclosure) fell to 1.63 percent, down from 2.12 percent a year ago;
–New loans originated January-November 2015 rose to 760,900, a 32.4 percent increase from a year ago. The balance of new loans in that same time was $25.1 billion, an increase of 25.2 percent.

HELOCS
–The severe delinquency rate (as a share of balances 90-days past due or in foreclosure) fell to 1.34 percent, down from 1.49 percent a year ago;
–From January-November 2015, total balance of new loans rose to $135.3 billion, a 21.6 percent increase from a year ago. Total number of new loans originated was more than 1.29 million, an increase of 13.1 percent; and
–Use rate as a percentage of outstanding balances is less than 51 percent, its lowest level since September 2008.