Since topping out in early 2010, the aggregate amount of severely delinquent mortgages has fallen by more than half. The improvement has been primarily concentrated in non-agency loans. Outstanding distressed loans are expected to return to pre-crisis levels within two years.
As of May, $450 billion in residential first mortgages were at least 90 days past due or in foreclosure. The level of distressed loans has subsided substantially from the peak of $700 billion reached in January 2010.
First mortgages originated between 2005 and 2007 accounted for 70 percent of the May total.
The statistics were reported Wednesday in the May National Consumer Credit Trends Report from Equifax.
The biggest improvement among all severely delinquent loans was with non-agency first mortgages, with aggregate balances falling to $320 billion from the January 2010 peak of $580 billion.
The 45 percent drop in severely delinquent non-agency mortgages dwarfed the 9 percent improvement in agency loans. Agency assets include loans owned or guaranteed by Fannie Mae or Freddie Mac; mortgages insured by the Federal Housing Administration; and loans guaranteed by the Department of Veterans Affairs.
Also showing a strong improvement were distressed home-equity loans, which have fallen 31 percent from the peak reached in February 2011.
“What is surprising is that even with the foreclosure moratoriums and the slow resolution of foreclosure backlogs, the downward trend has been a steady, consistent drumbeat of recovery,” said Equifax Chief Economist Amy Crews Cutts. “If this pace continues, we expect the volume of severely delinquent mortgage balances to return to mid-2007 levels by the end of 2014.”
Outstanding home mortgage balances totaled $8.6 trillion in May, contracting from the $9.8 trillion record high established in October 2008, according to Equifax.
Fannie Mae reported earlier this month that outstanding first mortgages accounted for around $9.303 trillion of the $10.140 trillion in total residential loans outstanding as of the second quarter.
Equifax said that collective balances on home-equity lines of credit have retreated to $560 billion as of last month from their peak of $680 billion three years earlier.
Aggregate HELOC credit limits fell to $1.02 trillion from a March 2008 peak of $1.30 trillion.
