Delinquency Rate Continues at 10-year Low

Posted on October 26, 2017 by Laura Lam

CoreLogic released its latest Loan Performance Insights report on national foreclosure and delinquency activity earlier this month.  According to the report, the share of mortgages that transitioned from current to 30-days past due was 0.9% in July 2017, down from 1.1% in July 2016. CoreLogic compares this to January of 2007 when “just before the start of the financial crisis, the current-to-30-day transition rate was 1.2% and peaked in November 2008 at 2%.”

In addition, it is noted that 4.6% of mortgages were in some stage of delinquency in July 2017 – a 0.9 percentage point year-over-year decline in the overall delinquency rate compared to last year.

Meanwhile, the foreclosure inventory rate measuring the share of mortgages in some stage of the foreclosure process “was 0.7% and the lowest since the rate was also 0.7% in July 2007.” Likewise, the data discovered the serious delinquency rate remained near the 10-year low of 1.7% reached in July 2007.

According to Dr. Frank Nothaft, Chief Economist for CoreLogic, while the U.S. foreclosure rate remains at a 10-year low, the rate across the 100 largest metro areas varies from 0.1% in Denver to 2.2 % in New York.  “The national serious delinquency rate remains at 1.9%, unchanged from June, and when analyzed across the 100 largest metros, rates vary from 0.6% in Denver to 4.1% in New York,” Nothaft said.

Additionally, CEO of CoreLogic Frank Martell said that even though delinquency rates are lower in most markets compared with a year ago, there are some worrying trends.  Martell explained that “markets affected by the decline in oil production or anemic job creation have seen an increase in defaults. We see this in markets such as Anchorage, Baton Rouge and Lafayette, Louisiana where the serious delinquency rate rose over the last year.”

Source:  CoreLogic

Housing Confidence on the Rise; Renters Optimistic

Posted on October 25, 2017 by Laura Lam

september housing optimismThe Fannie Mae Home Purchase Sentiment Index (HPSI) increased 0.3 points in September to 88.3, matching the all-time high set in June. The rise can be attributed to increases in 3 of the 6 HPSI components. The good time to buy component rose the most month-over-month, with the net share increasing 10 percentage points compared to August.

Renter respondents, in particular, buoyed the net good time to buy component, showing a substantial upward change in optimism in September. The net share who reported that now is a good time to sell a home rose 2 percentage points in September and is now up 23 percentage points compared to the same period last year. Meanwhile, the net share who said home prices will go up in the next 12 months fell 8 percentage points.

Even so, respondents continue to cite high home prices as the most important reason behind the bad time to buy and good time to sell indicators. The net share of those who believe mortgage rates will go down decreased 2 percentage points. Americans also expressed a slightly increased sense of job security, with the net share who say they are not concerned about losing their job increasing 1 percentage point. Finally, the net share of consumers who reported that their income is significantly higher than it was 12 months ago fell by 1 percentage point.

“The biggest driver for the increase in the HPSI is the rebound in the good time to buy sentiment,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The survey showed a meaningful pickup in the good time to buy component, especially from the renter respondents. Additionally, perceptions of easing inventory helped boost the net share saying that now is a good time to buy, which is consistent with less bullish home price appreciation sentiment during the month. Overall, we believe that the devastating impacts of the hurricanes will likely weigh on home sales in coming months, posing downside risks for our forecast, which already calls for only a modest gain in home sales this year.”

Source:  Fannie Mae

Mortgage Default Rates Begin to Rise

Posted on October 24, 2017 by Laura Lam

mortgage defaultsMortgage defaults in September were slightly higher than in the previous month and are still lower than a year ago but they are closer to matching levels seen in 2016.  The default rate for first mortgages last month was 0.66%, up a basis point from August, but down a basis point from September a year ago, according to Standard & Poor’s and Experian.

Second-mortgage default rates were three basis points higher on a consecutive-month basis at 0.53% but were 3 basis points lower year-to-year.  The composite default rate for mortgage, bank card and auto loan credit was up 2 basis points from a month ago and down 2 basis points from a year ago at 0.88%.  The auto loan default rate in September was up 10 basis points from where they were the previous month, and the same as where they stood a year ago at 1.05%.  Card defaults were down 4 basis points from the previous month but up 29 basis points year-over-year at 3.15%.

“No sector is currently showing substantial increases or signs that consumers are facing financial stress. Other economic indicators through the summer echo consumers’ favorable condition: debt service as a proportion of income is modest while consumer credit and mortgage borrowing continue to see moderate,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.

But upward pressure on defaults could increase.  “Consumers in some parts of the country may face other challenges that could shift the consumer credit default picture,” he said. “Hurricanes Harvey and Irma wreaked havoc across the South and Southeastern United States; more recent wildfires in California and the West are creating further damage and loss.”

Source:  National Mortgage News

Foreclosure Activity Plunges to 11-Year Low

Posted on October 23, 2017 by Laura Lam

Foreclosure activity hit an 11-year low in this year’s third quarter, as an improving economy and stricter mortgage standards helped stabilize the housing market to pre-2008 levels.  ATTOM Data Solutions released a report this week revealing that third-quarter foreclosure activity is down 13% from the previous quarter and 35% from a year ago.

The Q3 2017 U.S. Foreclosure Market Report showed a total of 191,824 U.S. properties with foreclosure filings, such as default notices, scheduled auctions or bank repossessions. This determined foreclosure activity in Q3 2017 was 31% below the pre-recession average of 278,912 properties with foreclosure filings per quarter between Q1 2006 and Q3 2007. The results of the study represented the fourth consecutive quarter where U.S. foreclosure activity has tracked below the pre-recession average.

“Legacy foreclosures from the high-risk loans originated between 2004 and 2008 have largely been cleared out of the distressed market pipeline,” said Daren Blomquist, senior vice president at ATTOM Data Solutions.  “Meanwhile, loans originated during the housing boom of the last five years are posting foreclosure rates below historic averages, with the notable exception of FHA loans originated in 2014, which have the highest foreclosure rate of any FHA loan vintage since 2009 — 29% above the historic average for FHA loans although still 55% below the peak in 2007.”

Counter to the national trend, 51 metro areas posted a year-over-year increase in foreclosure starts in Q3 2017, including Dallas-Fort Worth, Texas; Denver, Colorado; Cincinnati, Ohio; Cleveland, Ohio; and Columbus, Ohio.

Third quarter foreclosure activity was below pre-recession averages in 123 of the 217 metro areas analyzed in the report, officials said, including Los Angeles, Chicago, Dallas, Houston, and Miami.

Source: Attom Data Solutions/Financial Regulation News

Banks Prepare for Credit Card Defaults

Posted on October 20, 2017 by Laura Lam

Credit card delinquencies increased for three consecutive months, adding to signs that consumers in the U.S. are having a tough time paying their debt.  According to recent reports, credit card data from JPMorgan, Discover Financial Services and Bank of America show that the number of delinquencies is on the rise.

The reason for the uptick in the number of people who can’t pay their credit card bills is due to lenders going after consumers with less-than-stellar credit ratings. Although this practice is intended to fuel growth in a low-interest rate environment, the lower credit quality is coming back to bite them.

“A noticeable rise in delinquency rates – even from very low levels – is worth paying attention to,” said Andrew Haughwout, senior vice president at the New York Federal Reserve. “It is not clear yet what effect it will have on the future. But historically it has been the case that once these delinquency rates start to rise, they can continue to rise.”

The rates of delinquencies still remain below the levels during the financial crisis of 2008 and 2009, but any uptick means there will be higher loan losses for the financial companies.  In September, The Wall Street Journal reported that Capital One, Synchrony and Alliance Data Systems have all seen the rate of delinquencies among credit card holders increase as a percentage of their overall loans during the last few months.

Source:  PYMNTS.com/Bloomberg

Data Breaches Cost Firms $1.3 Million in 2017

Posted on October 19, 2017 by Laura Lam

Cyber attacks cost large North American businesses an average of $1.3 million in 2017, according to a new report from security vendor Kaspersky Lab and market research firm B2B International.  The companies surveyed more than 5,000 businesses across 30 countries to gather data on cyber security issues. The cost of data breaches and other attacks was up from $1.2 million in 2016, and totaled $117,000 per incident for small and medium businesses.

Companies are starting to view IT security as a strategic investment, the report said. The share of budgets spent on security is growing, reaching 18% compared with 16% in 2016. In 2016, the main reason businesses in North America wanted to increase IT security budgets was due to new business activities/expansion. But this year the increased complexity of IT infrastructure is driving budget increases.

However, while security appears to be receiving a larger proportion of the IT budget, the budget itself is getting smaller. The average IT security budget for enterprises worldwide dropped from $25.5 million in 2016 to $13.7 million in 2017.

Raising IT security budgets on a global scale is only part of the solution, the study said, but this allows businesses to take a proactive approach and avoid costly security costs when incidents occur. The top financial loss in North America when a data breach occurs stems from additional staff wages needed for enterprises, compared with loss of business and having to employ external professionals.

Source:  Information Management/Kaspersky Lab

Credit Card Delinquencies on the Rise

Posted on October 18, 2017 by Laura Lam

Credit card delinquency rose for the third straight month in September, data from JPMorgan Chase & Co. and card issuer Discover Financial Services suggested.  The data add to signs that U.S. consumers are struggling amid rising household debt, after bank results last week pointed to an increase in provisions for future losses.

September delinquencies for JPMorgan rose 1.22%, while those at Discover Financial were up 1.64% from August. Those at Bank of America also rose 1.56% — the second rise in three months.  Credit quality at several banks appears to be deteriorating as lenders target consumers with worse credit ratings to fuel revenue growth at a time when low interest rates are quashing their returns on other loans.

“Delinquency rates have risen in part because lending to subprime borrowers increased significantly in recent years,” said CreditCard.com’s senior industry analyst Matt Schulz.  “That brings with it a lot of risk, for both the banks and the consumer.”

JPMorgan said that provisions for credit losses across the bank rose 14% in the third quarter while Citigroup Inc saw a 15% rise.  While delinquency rates remain significantly below the levels seen during the 2008-2009 financial crisis, rising rates would mean higher loan losses for lenders.  U.S. household debts hit a record high after having earlier in the year surpassed its pre-crisis peak, helped by modest rises in mortgage, auto and credit card debt, where delinquencies jumped.

Source:  St. Louis Post-Dispatch

Boomers Struggle to Pay Off Mortgages Before Retirement

Posted on October 17, 2017 by Laura Lam

While outright homeownership increased among Baby Boomers after the last recession, they still lag previous generations, and may never catch up, according to the Fannie Mae Economic and Strategic Research Group’s latest Housing Insight Series.  Older generations such as Baby Boomers have criticized Millennials for waiting longer than their generation to buy a home, however even Boomers are failing to keep up with the pace set by the generation before them.

Baby Boomers are much less likely to own their home outright than the generations before them and may struggle to catch up before reaching retirement age.  According to the report, “The leading edge of the large Baby Boom generation has reached retirement age with a greater likelihood of carrying housing debt, raising concerns about their retirement financial security.  The oldest Boomers, who were aged 65 to 69 in 2015, were 10 percentage points less likely to own their homes outright than were pre-Boomer homeowners of the same age in 2000.”

Outright homeownership picked up after the Great Recession, and the younger end of the generation is more likely to be close to previous generations with their rate of outright homeownership.

boomers 2The chart above, which uses data from U.S. Census Bureau and the 2000 Census and American Community Survey, shows 26% of Baby Boomers aged 50 to 54 in 2015 owned their home outright, compared to 22% of homeowners of the same age in 2000.  But despite this uptick, even the youngest Baby Boomers will likely not be able to pull up their outright homeownership rates to the level of previous generations.

According to the report, “The relatively high incidence of housing debt among Boomer homeowners has the potential to strain their retirement finances. Given that income typically declines in retirement, monthly mortgage payments could stretch the household budgets of Boomers.”

The chart to the left shows the youngest Boomers will come the closest at 58%, compared to 59.8% among previous generations. The oldest Baby Boomers will come in significantly lower with a share of 49.4% reaching free and clear homeownership by retirement age.

Source:  Housing Wire/Fannie Mae

Consumer Delinquencies Improve in 2Q

Posted on October 16, 2017 by Laura Lam

Delinquencies in closed-end loans held steady in the second quarter as bank card delinquencies fell and home-related categories continued their return to normal levels, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin. Overall, delinquencies fell in 8 of the 11 individual consumer loan categories.  The composite ratio, which tracks delinquencies in 8 closed-end installment loan categories, remained at 1.56% of all accounts – well below the 15-year average of 2.16%.

“Delinquencies remain below historical levels as consumers continue to show great command of their finances,” said James Chessen, ABA’s chief economist. “The outlook remains very positive, as the strong job market, growing wages and rising wealth provide the financial wherewithal for consumers to keep current on their financial obligations.”

Delinquencies in bank cards (credit cards provided by banks) fell 7 basis points to 2.67% of all accounts and remain significantly below their 15-year average of 3.64%.  “Consumers continue to manage their credit cards very well,” Chessen said.  “Quarter after quarter, Americans have succeeded at keeping credit card balances low in relation to their disposable income.”

Delinquencies in all 3 home-related categories decreased. Home equity loan delinquencies fell 9 basis points to 2.50% of all accounts, dipping further under their 15-year average of 2.94%. Home equity line of credit delinquencies fell 4 basis points to 1.07% of all accounts and remain below their 15-year average of 1.18%. Property improvement loan delinquencies fell 3 basis points to 0.95% of all accounts, well below their 15-year average of 1.33%.  “Home equity-related delinquencies fell across the board as the housing market continued to improve, and they’re now back down to levels last seen in 2008,” said Chessen.

Delinquencies in indirect auto loans (arranged through a third party such as an auto dealer) rose only 1 basis point to 1.84% of all accounts, but remain well below their 15-year average of 2.19%. Delinquencies in direct auto loans (arranged directly through a bank) also rose 1 basis point to 1.04% of all accounts, remaining well under their 15-year average of 1.56%.

Chessen is encouraged by current economic conditions and consumer behavior, and remains cautiously optimistic amid uncertainty that lies ahead.  Despite the still-unknown financial impact of the recent hurricanes, he stated that “A strong economy and good consumer practices point toward steady delinquency levels in the near term.”

Source:  American Bankers Association

Meet the Next Generation of Homebuyers: Gen Z

Posted on October 13, 2017 by Laura Lam

gen z chartIn its most recent study, Zillow Group examined the newest generation to enter the housing market – Generation Z.  Generation Z is considered to be those born from 1995 to 2010, meaning the oldest in the generation are now 22 years old.  The Zillow Group Report on Consumer and Housing Trends 2017 shows this new generation now makes up more than 21% of the U.S. population, and is the most ethnically and racially diverse generation in our history. They are beginning to enter the housing market – as renters.

However, this generation is just as likely as older generations to say owning a home is a key component of the American Dream. In fact, 57% responded that they already considered buying a home while looking for their last rental.

So, what defines this new generation? The report showed they work hard to win a home, and even submitted more applications than any other generation at 3.1 versus 2.5 applications for all renters.  But despite the higher number of applications submitted, they also move more quickly through the process and spend the least amount of time searching. Generation Z typically spent less than one month searching for a place to live.  “It’s encouraging to see that Generation Z is inheriting the same notion of what home means as their parents and Millennial siblings,” said Jeremy Wacksman, Zillow Chief Marketing Officer.

“These tech-savvy, yet risk adverse renters are bringing their social personalities home, desiring communal amenities geared toward bringing people together,” Wacksman said. “As they mature and look toward homeownership, it will be interesting to see how their aspirations and preferences will shape the housing market.”

Currently, the housing market is still focused on Millennials, realizing they don’t all live at home with their parents, and are actually less likely to live at home than Baby Boomers were at that age.  While some studies show factors such as student debt could delay some Millennials from homeownership for up to 7 years, more and more they are becoming the driving force behind housing demand.  Zillow’s study shows Millennials poured about $514 billion into the U.S. housing market over the past year, and became the largest generation of homebuyers.

Source: Housing Wire