The number of mortgage holders carrying student loan debt has increased by more than 40 percent over the past 10 years, bringing the count from 5.4 million in 2006 to 7.7 million in 2016, according to Black Knight Financial Services’ May 2016 Mortgage Monitor [1] released Monday. The report displayed the correlation between borrowers with student loan debt and their mortgage performance.
Approximately 15 percent of active mortgages reside with borrowers who possess student loan debt. It was shown that borrowers with mortgages tend to perform better on student loan debt obligations than those without mortgages. Additionally, it was shown that fewer than one percent of all active mortgages belong to borrowers who are 90 or more days past due on their student loan debt.
The report also found the share of mortgage originations given to borrowers with student loan debt has increased to 19 percent of all originations, a new high in 2014. This information was gathered from the most recent full-year data currently available. In 2014, 23 percent of purchase originations held student loan debt compared to 14 percent of refinance originations holding student loan debt. This is noted as a direct correlation to the change from a refinance to purchase-heavy market from 2012 to 2014. According to Black Knight, is something to watch going forward if and when interest rates begin to rise again.
Even with the substantial increase, this does not mean that all mortgages will be successfully fulfilled to borrowers holding student loan debt. Borrowers severely delinquent on their student loan debts are five times more likely to be delinquent on their mortgage as well compared to those who are current on student loan debt. As well, these borrowers are nearly six times more likely to be delinquent than the average borrower without any student loan debt.
To add to these findings, 52 percent of borrowers with student loan debt were shown to have a credit score below 720, while only 38 percent of borrowers without debt fall in that category. Borrowers with a 760+ credit score were shown to be the least likely to carry student debt, representing only less than 10 percent of that population. This subset was shown to be even less likely to be delinquent on their student loan debt, but on the rare occasion where they are, it’s a very strong indicator of mortgage risk.
To view the full report, click HERE [1].