Equifax: 2016 First Mortgage Total Balances Up 2.4%; Delinquency Rates Fall

Equifax, New York, reported the total balance of outstanding first mortgages at the end of 2016 rose to $8.43 trillion, a year-over-year increase of 2.4 percent.

The company’s February U.S. Consumer Trends report also reported the total number of outstanding first mortgages as of December totaled 49.7 million, virtually unchanged from a year ago. However, the severe delinquency rate (as a share of balances 90-days past due or in foreclosure) fell to 1.26 percent, down from 1.77 percent a year ago.

Through October, Equifax reported the total number of new loans originated grew to 6.91 million, an increase of 8.8 percent from a year ago. The total balance of new loans in that same period rose to $1.69 trillion, an increase of 13.8 percent.

Equifax also reported more than 326,300 new loans originated for borrowers with subprime credit, a year-over-year increase of 9.5 percent. In that same period, the total balance of new loans grew to $54.7 billion, an increase of 15.6 percent. Of all new first mortgages, 4.7 percent were issued to subprime-credit borrowers.

The report said as of December, the total outstanding balances on home equity loans fell to $128.2 billion, a year-over-year decrease of 3.4 percent. Total outstanding home equity loans fell to 4.4 million, a year-over-year decrease of 2.3 percent. The severe delinquency rate (as a share of balances 90-days past due or in foreclosure) fell to 1.41 percent, down from 1.59 percent a year ago.

“First mortgage debt has been gradually rising since reaching a trough in 2013, however, the rise in balances is just coming from loan size as the number of accounts outstanding today is about the same as it was at the end of 2013,” said Equifax Chief Economist Amy Crews Cutts. “Originations, though, are growing for all mortgage products. In 2016, first mortgages originations rose 18.5% as a share of balances to $2.07 trillion and 13.1% as a share of loans, to 8.41 million. Home equity originations were not quite as robust, rising 6.8% for installment loan balances and 8.5% for HELOC limits.”

The report said the total number of new home equity installment loans originated rose to 689,400, an increase of 4.5 percent from a year ago. The total balance of new loans in that same time grew $22.95 billion, an increase of 3.5 percent. Equifax reported 71,140 new loans originated for borrowers with subprime credit, a year-over-year increase of 2.7 percent. In that same time, the total balance of new loans rose to $1.54 billion, an increase of 7 percent. Of all new home equity installment loans, 10.3 percent were issued to subprime credit borrowers, a slight decrease from the previous year’s share (10.5 percent).

The number of outstanding Home Equity Lines of Credit as of December fell to 10.8 million, a year-over-year decrease of 3 percent. Total balances outstanding on HELOCs fell to $474.9 billion, a decrease of 3.8 percent. The severe delinquency rate (as a share of balances 90-days past due or in foreclosure) fell to 1.18 percent as of December, down from 1.33 percent a year ago. The write-off rate fell to 2.7 basis points in December, a decrease of 23.9 percent from the previous year.

“There is the idea out there that homeowners are simply refinancing their HELOCs into new loans, sort of kicking the can down the road,” Crews Cutts said. “But total balances are declining as are accounts. Meanwhile HELOCs are showing improved performance year-over-year. 90% of new HELOC borrowers have a credit score of 700 or more, and just 1.5% of HELOC accounts and 0.5% of HELOC credit limits were issued to borrowers with a credit score of 620 or less in 2016. If you’re looking for risk, it isn’t in HELOCs today.”

Equifax said the total number of new HELOCs originated grew to 1.2 million, an increase of 4.6 percent from a year ago. The total balance of new loans in that same period rose to $132.6 billion, an increase of 9.1 percent. The report noted 17,800 new HELOCs originated for borrowers with subprime credit, a year-over-year increase of 5.6 percent. In that same period, total balance of new loans rose to $706.2 million, an increase of 16.9 percent. Of all new HELOCs, 1.5 percent were issued to subprime credit borrowers.

The report can be accessed at http://files.shareholder.com/downloads/ABEA-32806R/3819103106x0x927248/F0BB16ED-3E67-4B31-BEFB-33AEE0DA2DDC/EFX_Investor_Relations_Consumer_Trends_4Q2016.pdf.