Two categories of mortgage originations that recently reached new milestones while originations rose across all risk tiers were subprime and near prime, according to the latest data from TransUnion [1]—which the company says indicates that access to mortgage credit is expanding.
TransUnion’s Quarterly Insights Report for Q3 [1] 2016 found that subprime originations grew by nearly 11 percent in the second quarter (viewed in one quarter arrears). Approximately 64,000 subprime loans were originated in Q2, the most in nearly seven years, according to TransUnion.
Lenders made approximately 262,000 near prime mortgage originations in Q2, a post-recession high for one quarter and an increase of 5.7 percent over-the-year, TransUnion reported.
“These new milestones in subprime and near prime account originations reflect growing credit access across the risk spectrum,” said Joe Mellman, VP and head of TransUnion's mortgage group [2].
While the number of subprime and near prime mortgage loans is rising, Mellman stated that “We don’t see a cause for concern,” noting that subprime and near prime originations still reported a relatively small market share in Q2—3.2 percent for subprime and 13.2 percent for near prime.
“We’ve seen underwriting relax somewhat as the recovery has progressed,” Mellman said. “In Q2 2016, 36 percent of new loans are in prime and near prime, compared to 32 percent in Q2 2013.”
Higher home prices led to higher mortgage loan amounts as mortgage balances rose by 1.7 percent over-the-year in Q3 up to $8.39 billion, according to TransUnion.
Black Knight Financial Services, in its October 2016 Mortgage Monitor released on Monday, also noted a spike in originations in Q3 with their highest quarterly volume since the second quarter of 2009 ($579 billion in first-lien mortgages). Purchase volumes increased by 7 percent over-the-year in the third quarter, and their year-to-date total of $818 billion is the highest since 2007 for the first three quarters of a year, Black Knight reported.