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IS TIGHTER CREDIT FOR THE BETTER?
It's no secret underwriting standards
have tightened in recent years, and while
many decry the heightened standards for
making homeownership less accessible to
some Americans, CoreLogic economist Sam
Khater pointed out in a recent report that
heightened standards are undoubtedly impacting
delinquency rates for the better.
"While there has been much consternation
about underwriting being too tight in the
context of forthcoming mortgage regulations,
one underappreciated outcome has been the very
good performance of mortgages during the last
few years," Khater said. "Tighter credit results in
flawless performance."
The serious delinquency rate, which
includes mortgages 90 or more days past due,
in foreclosure, or REO, stood at 5.4 percent
as of July, according to CoreLogic's market
assessment. While still significantly higher than
the historical norm of 1 percent, the current rate
has come a long way since its peak of 8.5 percent
in January 2010, the company says.
Drilling down deeper, Khater examined 2013
vintage loans and compared them to vintages
from years past. Over the first half of 2013, the
serious delinquency rate for newly originated
loans was six basis points, Khater says. This is
down drastically from the 108 basis-point serious
delinquency measurement on loans originated in
2007, which is the worst year of this millennium,
Khater noted.
The current rate is also better than the rate
recorded for 2003, a year when home prices were
rapidly increasing. Serious delinquencies for
2003 vintage loans was 15 basis points, Khater
explained.
Serious delinquencies for 2013 loans are
also down from 10 basis points among loans
originated in 2012.
"This clearly indicates that the most recent
mortgage vintages are pristine relative to even
the good performing years of the early 2000s,"
Khater said.
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