While brokers benefitted from origination increases during Q2, fears that the market is on a trajectory to reach 2008 levels have been assuaged by decreases in debt and delinquencies.
“Underwriting standards remained tight for mortgages in the second quarter, even as mortgage originations increased overall,” the New York Federal Reserve writes in its quarterly report on household debt and credit. “Of the newly originated mortgages this quarter, $232 billion were originated to borrowers with credit scores over 780, and by contrast, only eight percent, or $37.9 billion, of all new mortgages were originated to borrowers with credit scores below 660.”
Originations increased by $97 billion over the previous quarter to $466 billion, marking the fourth consecutive quarter of increases.
Mortgage balances, meanwhile, decreased by $55 billion to $8.12 trillion – proving mortgage rule changes have led to more prudent lending, according to industry players.
“I think the 2008 market and today’s are virtually incomparable due to all the changes that have happened during that meantime; according to virtually every metric the lending industry reviews, the loans that are done now are more credit-worthy than those done 7 years ago -- with higher credit scores and more underwriting due diligence,” Roger Steur of Principal Mortgage told Mortgage Professional America. “Today a borrower’s credit, income and assets are thoroughly vetted and reviewed in an attempt to decrease the risk of default.”
Overall household debt also remains 6.5 percent below the Q3 2008 peak of $12.68 trillion.
And delinquency levels continue to improve as well. As of June 30, only 5.6 percent of outstanding debt was in delinquency, down from 5.7 percent in the first quarter.
“Mortgage delinquencies improved again, with the share of mortgage balances 90 or more days delinquent decreasing slightly; 2.5 percent of mortgage balances were 90+ days delinquent during 2015 Q2, compared to three percent in the previous quarter,” the New York Fed writes.
The latest mortgage industry numbers point to an improving market, but also dispel worries it could be building to pre-meltdown highs.