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Write-Off Rates Return to Pre-Crisis Levels

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June 2016 Equifax National Consumer Credit Trends Report found the first mortgage write-off rate in the U.S. to be 3.3 basis points of outstanding balances, while the total number of first mortgage defaults in June was 17,909, the lowest since January 2007, according to an announcement from Equifax, Inc [1].

“The backlog of foreclosures from the financial crisis finally appears to be waning and write-offs are returning to historically-normal levels,” said Amy Crews Cutts, senior vice president and chief economist at Equifax. “Rising home values have helped significantly, as have improving labor markets. Given the low inventory of homes for sale and the overall improving credit profile of the U.S. consumer, we expect home sales to maintain the upward trend we’ve seen in the first half of the year and for mortgage default performance to continue its downward path.”

The report stated that while the overall U.S. first mortgage write-off rate returned to historic lows, some areas remain elevated. The write-off rate in Puerto Rico is three times higher than the national average at 12.9 and Nevada’s rate is twice as high at 6.6 basis points.

For Home Equity Lines of Credit (HELOC) and home equity installment loans, the report says write-offs, as a share of total balances, for year over year there was a slight increase in home equity installment loan write-offs from 7.6 basis points to 8.0 basis points as well as a decrease in home equity revolving lines of credit from 4.0 basis points to 3.4 basis points.

In regards to first mortgages, Equifax states that the severe delinquency rate, a share of balances 90-days past due or in foreclosure, is 1.40 percent which is down from 2.07 percent in June 2015. Likewise, as of June 2016, the total number of first mortgages outstanding is 49.8 million. That is an increase of 0.7 percent from June 2015. Additionally, the total balances outstanding on first mortgages are $8.33 trillion, a year-over-year increase of 2.8 percent. 

For Home Equity Lines of Credit (HELOC), it was shown that the severe delinquency rate (as a share of balances 90-days past due or in foreclosure) is 1.28 percent as of June 2016, down from 1.45 percent in June 2015 and the total number of outstanding HELOCs is 10.9 million, a year-over-year decrease of 3.4 percent from June 2015. It was also shown that the total balances outstanding on HELOCs in that same time is $486.5 billion. This was a decrease of 3.5 percent.