LPS: Credit Characteristics Continue to Improve

Credit standards continue to look better and better as the market pulls away from the ""bubble era"" and the subsequent crash, ""Lender Processing Services"":http://www.lpsvcs.com/Pages/default.aspx (LPS) says in its January Mortgage Monitor report.

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January's report comes on the heels of ""December's news"":https://themreport.com/articles/lps-2012-strongest-year-for-originations-since-2007-2013-01-31 that mortgage origination volume reached a five-year high in 2012. According to LPS, last year saw the creation of nearly 8.6 million loans. While 84 percent of those were government-backed, LPS observes that government share has been on the decline since climbing up to 91 percent in 2009.

While origination volume hasn't spiked as high as one might expect given today's low rates (a result of tight credit conditions or, as LPS suspects, ""burn-out""), the company notes credit characteristics are nearly ""pristine"" in recent vintages, especially compared to those of loans originated during the bubble.

According to LPS, the average weighted credit score for a loan originated in 2012 was 747 compared to 2006's average of 699. Meanwhile, the average loan-to-value (LTV) ratio for loan made last year was 75.1 percent compared to 76.7 percent in 2006.

In addition, LPS finds 1.5 percent of borrowers were non-current by the one-year mark for 2012 loans, while 8.7 percent of borrowers had fallen behind during the first year for 2006's vintages. The highest non-current rate in recent history was for 2007 loans--9.2 percent were non-current by the one-year mark.

LPS' report also notes that refinance volume under the Home Affordability Refinance Program (HARP) continues to go on strong, with HARP originations making up 22 percent of all 2012 volume. LPS estimates 2.6 million loans are potentially eligible for HARP refinancing, while about 20 percent of all loans meet broad-based refinance criteria.