Because origination volume has been declining steadily during the past five years (2013 being an exception), the average age of a mortgage has been rising steadily, according to Black Knight Financial Services' Mortgage Monitor Report. In fact, as of August, the weighted average loan age had reached its highest point ever at 54 months.
Perhaps not surprisingly, the report finds that the weighted average loan age was higher among low credit score loans in August, while higher-credit-bracket loans have remained constant.
‘In terms of the entire active mortgage population, average loan age has been rising steadily for at least the last nine years,’ says Kostya Gradushy, manager of research and analytics for Black Knight, in a release. ‘The high volume of originations in 2013 resulted in a temporary slowdown. However, the average loan age since then has hit its highest level ever at 54 months.
‘Reviewing the data at a more granular level, we see that the age of loans with credit scores of 750 and above has remained relatively constant for the last five years,’ Gradushy adds. ‘However, lower credit score loans – particularly those with scores below 700 – have seen dramatic increases in average age.’
In other words, lenders have been originating mortgages to higher-credit score borrowers at about the same rate during the past five years, thus keeping the average loan age about the same, whereas there has been a dramatic decline in the number of mortgages originated to lower-credit-score borrowers, thus significantly boosting the average loan age for that group.
The report also reveals that delinquencies in 2012-2014 vintage loans were lower than any of the prior seven years. In fact, the 2012-2014 vintage is the best-performing on record, even among credit scores below 660, the report reveals.
‘Even among borrowers with lower credit scores, these vintages are outperforming all previous vintages,’ Gradushy says. ‘This holds true for Federal Housing Administration mortgages as well, where we found that early-stage delinquencies were lower than in all pre-2012 vintages.’
In general, the report reveals that a majority of mortgages that were performing post-2012 are still performing today, while nearly half of those that were delinquent remain delinquent.
Of the loans that were in foreclosure at the end of 2013, about 49% remained in foreclosure 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.
The report also finds that the three-month redefault rate on mortgage modifications in August spiked up to its highest rate since 2011 – however, this was true only for modifications on loans in foreclosure. Redefault rates on modifications of loans in delinquent statuses of both 90-plus days and 120-plus days actually saw redefault rates decline in 2014, as they have for the last four years.
As of August, the total U.S. loan delinquency rate was about 5.90% of all mortgages, an increase of 4.68% compared to July.
The total U.S. foreclosure presale inventory rate was about 1.80%, a decrease of about 2.80% compared to July.
States with the highest percentage of delinquent loans (30-plus days overdue) included Mississippi, New Jersey, Louisiana, New York and Florida.
States with the lowest percentage of delinquent loans included Arkansas, Montana, Colorado, South Dakota and North Dakota.
States with the highest percentage of seriously delinquent (90-plus days overdue) included Mississippi, Alabama, Louisiana, Rhode Island and Massachusetts.