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Subprime HELOC Lending Rises, Delinquency Down

Not only are borrowers doing a better job of paying on their residential credit products, but lenders are giving more credit lines to subprime borrowers.

During just January of this year, there were 88,000 home-equity lines of credit originated for $9.5 billion.

That was the most monthly HELOC production in seven years and an increase of 27 percent from a year earlier.

The details were spelled out in the National Consumer Credit Trends Report from Equifax.

Equifax Chief Economist Amy Crews Cutts explained in a written statement that low interest rates in place on first mortgages are helping to drive increased HELOC demand.

Subprime borrowers are also cashing in on HELOC activity, with lending to borrowers whose Equifax Risk Scores were less than 620
rising 36 percent from one year prior.

The subprime share of HELOC originations rose to 1.5 percent from 1.3 percent one year prior.

There were 11.4 million HELOCs outstanding for $509.8 billion
as of March 2015. The aggregate principal balance was down 3 percent from the same point last year.

Another 4.5 million home-equity loans were outstanding for $136.1 billion, down 16 percent from 12 months previous.

As of the first-quarter 2015, delinquency of at least 90 days on first mortgages was 2.35 percent. The rate tumbled from 3.27 percent as of the same point last year.

The 90-day rate on HELOCs was 1.47 percent as of the most-recent period, falling from 1.71 percent a year earlier.

On HELs,
the rate of serious delinquency tumbled to 1.98 percent from 2.59 percent as of the first quarter of last year.

“We’re seeing borrowers become increasingly better at making on-time payments, but we’re also seeing a faster rate of amortization due to low interest rates,” Cutts stated. “Because a larger portion of each payment is going to principal, consumers are now paying off their mortgage debts faster than they would have just a few years ago.”

Excluding bankruptcies, there were $12.34 billion in write-offs on first mortgages, HELs and HELOCs during the first three months of this year.

The volume of write-offs dropped by a third compared to the first-quarter 2014.

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