ATLANTA- The economy may be recovering, but the nation’s housing market is still putting pressure on growth as mortgage delinquencies remain above pre-recession levels--and high shadow inventory levels are a major culprit. So says a new study from Equifax.
“While we are seeing stabilization across multiple sectors of lending, there remains a significant volume of delinquent first mortgage loans, which has slowed the foreclosure process,” says Craig Crabtree, senior vice president and general manager at Equifax Mortgage Services. “Until these foreclosures are processed, the mortgage market will continue to impact economic growth.”
Write-off dollars for home finance, which includes first mortgage and home equity installment loans as well as home equity revolving accounts, are still climbing and have yet to show signs of peaking. As of May 2011, Equifax shows there are about $319.7 billion in 2006 and 2007 first mortgage vintages that are in the initial foreclosure process--many of which may be written off.
Real estate owned properties represent another recovery roadblock. According to Equifax, first mortgage REO rates remain high as lenders struggle to divest of properties unsuccessfully sold through a short sale or foreclosure auction. In May 2011, 3% of all US first mortgages, a total of $21.8 billion, were REOs.
Here are some more troubling statistics: Almost two-thirds of past-due balances are sourced from loans originated from 2005 to 2007, with home equity revolving potential foreclosures totaling $11.9 billion in May 2011. While home equity line originations in March 2011 increased for the first time in four years, the average credit limit on a home equity line dropped 15.07% over the same time period.
Finally, the home equity line of credit given to prime borrowers totaled $6.4 billion in March 2011--more than 98% of the $6.5 billion in new home equity loans awarded during this time period. Sub-prime loans accounted for only $100 million of this total, reflecting the impact of tighter underwriting strategies.
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