Tag Archives: Credit Score

Subprime credit scores are declining across the country with strong declines in a few rebounding markets, according to Equifax. Designating credit scores below 620 as ""subprime,"" Equifax found the number of subprime borrowers decreased 2.1 percent from the third quarter of 2011 to the third quarter of 2012. The 2.1 percent translates to about 1 million Americans who rose from the subprime category. Equifax also found ""early housing-bust markets"" are experiencing improving credit scores as time passes since the worst of the foreclosure crisis.

Apparently, if one loses his or her home to foreclosure, the waiting period to qualify for another mortgage can easily be another decade. According to a report from the Federal Reserve Bank of San Francisco, a mere 10 percent of borrowers with a history showing a serious delinquency were able to obtain a mortgage again within 10 years. For borrowers who end their mortgage for a reason other than default, they were able to access mortgage credit about two-and-a-half times faster than those who went into default.

The housing crises seems to have led Americans to take a less critical view of strategic default. According to a recent survey that polled 1,026 U.S. adults, 32 percent stated they believe homeowners should be able to strategically default without facing consequences. The online survey was conducted by JZ Analytics on behalf of ID Analytics.

For the first quarter of 2012, the Census Bureau reported the homeownership rate dropped to 65.4 percent, which was a yearly (66.4 percent) and quarterly drop (66.0 percent). Even more significant was the fact that rate had never seen such a low since the first quarter of 1997 when the rate was also 65.4 percent. In a report, Paul Diggle of Capital Economics wrote, ""it's plausible that tight credit, subdued confidence and many more foreclosures will drive the homeownership rate down to 64%.""

An already positive trend in mortgage defaults continued through the month of June, according to data released Tuesday in the S&P/Experian Consumer Credit Default Indices. The data shows that most loan types-including bank card and first and second mortgage loans-saw a decrease in default rates, many of them for the sixth consecutive month. Four loan types posted their lowest rates since the end of the recent recession.

Mortgage lenders remain cautious in terms of credit quality, down payments, and valuations, as evidenced by the findings outlined in the new Origination Insight Report generated by Ellie Mae. The report series tracks the current lending environment for refinance and purchase mortgages, and it indicates the average credit score for loans approved and closed is steadily rising, while acceptable loan-to-value (LTV) ratios are declining. Ellie Mae says mortgage loans closed in February carried an average credit score of 750, with an LTV of 76 percent.

Consumer credit data suggests spending will increase and the housing market will begin to emerge from its slump this year, according to Equifax and Moody's Analytics. Both companies note that as key market data align with pre-recession totals, consumers should anticipate steady economic growth for major credit sectors, including auto, bank card, and consumer finance. While the mortgage lending sector continues to see the highest percentage of delinquencies, it too is showing signs of increased traction in the coming months.

Overall, the addition of 683,000 new jobs and the best credit picture in more than 15 years helped improve the financial health for the average U.S. household, but these gains were offset somewhat by a decline in net worth and tight household budgets, according to the Q4 2011 report from CredAbility. A score below 70 indicates financial distress, with U.S. households scoring 67.6 on the 100-point scale for this quarter, a smidge higher than the previous quarter, which was at 66.7.

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit. The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes ""the clearest sign yet of an improvement in mortgage credit conditions.""

The economic environment of the last several years has added to the ranks of first-time defaulters. According to a survey conducted earlier this year by Deloitte, 11 percent of bank customers fall into this category, meaning they have experienced their first default or serious delinquency because of the recent financial crisis and recession. Deloitte contends that servicing and default management strategies should be tailored to match these customers' needs to capture what will likely be a profitable segment over time.