A new report indicates that recently originated mortgages are performing dramatically better than older vintages, though delinquency in the aggregate was higher last month. The outlook is for better economic conditions by the end of this year.
Residential delinquency of at least 30 days on securitized mortgages was 6.62 percent in August, according to CreditForecast.com from Moody’s Analytics and Equifax. (a spokeswoman for Moody’s clarified after the publication of this story that delinquency reflects all mortgages, not just securitized loans)
A month earlier, the rate of late payments was 6.54 percent.
“Default rates (including bankruptcies) fully reversed last month’s declines, delinquencies increased by 9 basis points from July, and the pace of de-leveraging continued to slow,” the report said of consumer delinquency of all types. “While labor market and global uncertainties are weighing on consumers, conditions should improve later this year as economic growth re-accelerates.”
Moody’s noted that slower originations are contributing to the rise in defaults, but volume has been picking up — and the new originations are of higher quality.
The report also indicated that balances terminated through bankruptcy and default amounted to 0.27 percent of outstanding balances last month. The rate was 0.20 percent in July.
Performance on recent vintages is dramatically better than older vintages — especially when factoring in the weak economy.
“As a result of the tougher lending standards imposed, mortgage originations since 2008 have performed exceptionally well,” the report said. “However, the small size of these vintages relative to the older, distressed originations from 2006 and 2007 has limited their help in pulling down default rates at the portfolio level.”
