U.S. mortgage delinquency levels have reached new post-crisis lows, according to industry data.
The proportion of mortgages in which the borrower is 60 days or more behind on repayments dropped 8 percent from a year ago to 2.29 per cent as of the end of September. That is the lowest since the records began in 2009, the Financial Times reported.
The tumbling rate highlights how the ultra-low interest rates that are squeezing banks’ lending profit margins are also giving relief to their customers.
The data demonstrate how the Federal Reserve’s easy money policies have helped borrowers. Released a day before Americans go to the polls, they are also the latest batch of numbers that would appear to support Democrats’ claims that President Barack Obama has led an economic recovery.
“The US consumer is still fine,” Torsten Sløk, chief international economist at Deutsche Bank, told the FT. “Things are moving along nicely.”
But there are some storm clouds on the lending horizon.
Subprime borrowers are falling behind on their car loan payments at the highest rate in more than six years, and some bonds backed by these loans are vulnerable to getting downgraded, according to S&P Global Ratings.
Competition has spurred lenders to loosen standards and resulted in more delinquencies and default by people with weak credit, the ratings firm said. Subprime borrowers were behind by more than 60 days on about 4.85 percent of auto loans in August, the highest level since January 2010. The rate was 4.14 percent in August of last year, S&P said. For prime loans, delinquencies in August rose to 0.5 percent from 0.41 percent in the same month in 2015. The figures apply to loans that have been bundled into bonds.
The ratings firm said it may have to downgrade some subprime auto loan securities that have high-yield grades because of the increased delinquencies and loan losses, a statement it first made last month.
Some investors believe that subprime auto loans will continue to deteriorate, and have looked for ways to bet against them. After the financial crisis, mortgage lenders have been required by law to verify that applicants can repay their debt, but car lenders do not have that obligation.
Meanwhile, mortgage delinquencies and foreclosures surging in states whose economies are dependent on oil.
Over the past six months, mortgage trouble has jumped, in some cases by double-digits, in "energy" states, according to data from Black Knight Financial Services.
The percent of borrowers who are “noncurrent,” which means either delinquent or in foreclosure has spiked 20% in Alaska, and 19% in Wyoming.
"That’s taking place even as the national noncurrent rate keeps falling. It’s down 1% during this period — but that decline was from very low levels to begin with," MarketWatch reported.
"Several of the oil states — Alaska, Wyoming, and both Dakotas — have had noncurrent rates below the national average for years, even now. But Black Knight points out that both Texas and Oklahoma have gone from below the national average to above it."
(Newsmax wire services Bloomberg and Reuters contributed to this report).
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