Higher quality originations have driven the delinquency rate on mortgages, or the percentage of mortgages on which borrowers are 60 or more days overdue with their payments, down by 20 percent year-over-year in Q2 down to 2.72 percent, according to TransUnion's Industry Insight Report for Q2 released Monday.
The delinquency rate is less than half of what it was three years ago, when it was reported at 5.39 percent for Q2 2012, according to TransUnion.
"This is the lowest mortgage delinquency level we’ve seen in several years – down from a peak of nearly 7 percent in early 2010," said Joe Mellman, VP and head of TransUnion’s mortgage group. "This is largely due to foreclosures and other seriously delinquent accounts continuing to work their way through the foreclosure process, as well as a reflection of the high credit quality of recent originations."
The age group that saw the largest decline in delinquent mortgages was the 30 and under group, or the "millennials," who experienced a drop from 2.32 percent in Q2 2014 down to 1.7 percent in Q2 2015, TransUnion reported.
All 10 of the largest metro areas and 48 states reported double-digit year-over-year declines in the percentage of seriously delinquent mortgages in Q2, according to TransUnion. The metro areas that experienced the largest declines were Miami (40 percent, down to 5.31 percent) and Los Angeles (29.1 percent, down to 2.07 percent).
The average mortgage balance increased slightly both over the quarter and over the year. For Q2 2015, the average mortgage balance was $188,237, which was up from $186,999 in Q2 2014 and from $187,175 in Q1 2015, according to TransUnion.
All mortgage originations, measured by loan count, jumped up to 1.48 million in Q2, which was an increase of 2.4 percent from the previous quarter and of 40 percent from the same quarter a year earlier. A big reason for the substantial year-over-year growth was increases in the Prime Plus and Super Prime originations, which climbed to 42.8 percent and 56 percent, respectively. The number of jumbo loan counts rose from 46,000 in Q1 2014 up to 63,000 in Q1 2015.
"We believe a major reason for the increase in mortgage originations was due to falling mortgage interest rates," Mellman said. "The growth in jumbo loans for the Prime Plus and Super Prime risk tiers was another key driver. Despite this increase, it should be noted that there were 1.1 million fewer mortgage originations this past quarter compared to the pre-recession high in the third quarter of 2007."