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The Impact of a Tightening Mortgage Market

LenderOnline loan applications are rising with 38 percent of all unsecured personal loan balances being driven by fintech loans, according to the latest TransUnion Q4 2018 Industry Insights Report released on Thursday. Despite this overall rise in lending led by fintech, the report revealed that the mortgage market continued to soften as delinquencies declined.  

Despite the rise in overall consumer borrowing and the increased use of fintech, home mortgages have cooled slightly, the report noted. Data revealed that of the top 20 metropolitan statistical areas (MSAs), those with an average new account balance of over $300,000 saw a decline of 10 percent in year-over-year originations. On the other hand, those with an average new account balance of less than $300,000 saw growth of 2 percent in year-over-year originations.

Average new mortgage account balances dropped to $227,376, from $228,563 in Q4 2017.

"The decrease we’re seeing in new account balances could be due to a number of factors, the largest of which may be a change in the mix of mortgage originations from high priced MSAs to low priced MSAs. Of the top 20 MSAs, those with an average new account balance of over $270,000 had a decline of 17 percent in year-over-year originations, while those with an average new account balance of less than $270,000 saw only a 5 percent decline in year-over-year originations," said Joe Mellman, SVP and mortgage business leader at TransUnion.   

Though mortgage originations continue to remain low relative to past years, the report indicated a slight increase in lending activity to subprime borrowers. An increase of 2 percent was recorded in originations to subprime borrowers on a year-over-year basis—a growth trend now observed since Q1 2018. The average debt per borrower was $206,922. However, Mellman pointed out that as the mortgage market tightens, "lenders are expressing only slight interest in subprime lending—originations to subprime consumers still represent less than 4 percent of total originations."

The report indicated that serious mortgage delinquencies continued to decline. The serious delinquency rate for Q4 2018 was 1.66 percent down from 1.86 percent during the same time last year. Additionally, 15 of the 20 largest MSAs experienced double-digit year-over-year percentage declines. “Only three MSAs, Houston, Miami, and Tampa, experienced an uptick in year-over-year delinquencies. This was expected, as the comparison point is Q4 2017, a quarter when those MSAs experienced an artificially low delinquency rate due to natural disaster forbearance programs," Mellman said. 

Per the Q4 2018 IIR Mortgage Loan Summary, serious mortgage delinquency rates have continued to remain low. The serious delinquency rate for Q4 2018 was 1.66 percent, down from 1.86 percent at the same time last year. In addition, 15 of the 20 largest MSAs experienced double-digit year-over-year percentage declines.

About Author: Stephanie Bacot

Stephanie Bacot is an experienced multimedia writer having created content for print, web, television, and more. She is the past producer of BIZTV, a national television network for businesses and entrepreneurs that reached more than 200,000 professionals. She has more than 15 years’ experience in healthcare marketing and was an advertising exec for Healthcare Journal of Baton Rouge, a trade publication focused on the healthcare industry, as well as the marketing director for a $5 million surgery center. Bacot is a graduate of Louisiana State University with a degree in Marketing and Communications. She resides in Dallas when she’s not pursuing her love of travel.
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