Are borrowers still struggling with new loans?

by Rachel.Norvell07 Oct 2014
The average mortgage age has reached its high level ever, indicating that despite increased mortgage originations volumes during 2013, borrowers are still struggling with new loans.

According to Black Knight Financial Services’ August Mortgage Monitor report, the weighted average loan age hit a record-high at 54 months compared to an average of 50 months a year earlier.

The mortgage age measures how long a borrower has a loan before paying it off (selling or refinancing), or before the loan was closed due to a foreclosure. The rise in the average age of a mortgage could also be a sign less homeowners are refinancing since mortgage rates have started to rise.

"In terms of the entire active mortgage population, average loan age has been rising steadily for at least the last nine years," said Kostya Gradushy, manager of research and analytics at Black Knight. "The high volume of originations in 2013 resulted in a temporary slowdown.”

The age of loans with credit scores of 750 and above has remained relatively constant during the last five years. Yet, lower credit score loans -- particularly those with scores below 700 -- have seen dramatic increases in average age.

"We also looked again at mortgage performance and found delinquencies in 2012-2014 vintage loans lower than any of the prior seven years,” said Gradushy.” In fact, even among borrowers with lower credit scores, these vintages are outperforming all previous vintages. This holds true for FHA mortgages as well, where we found that early-stage delinquencies were lower than in all pre-2012 vintages.”

Black Knight also examined the status of loans that had been in foreclosure at the end of 2013 and found that 49% of those loans remained in that status as of August 2014. Further, 25% of these loans had been modified at some point in the last eight months before falling back into foreclosure.

Re-default rates are failing to improve with the three-month re-default rate on 2014 modifications at the highest level since 2011. This held true only for modifications on loans in foreclosure, though.