Jump in short-term delinquencies is the largest in at least a year

VantageScore, a credit measure provider that Fannie Mae and Freddie Mac lenders will be working with in conjunction with future loan submissions to the government-sponsored enterprises, reported a spike in 30 to 59-day past due loans for mortgages during June.

The delinquency rate in this category jumped to 0.78% from 0.66% the previous month but remained well below the pre-pandemic level of 1.22% seen just prior to the pandemic in January 2020, according to the company’s Credit Gauge report.

That mirrored a trend in the broader consumer credit market, where the short-term delinquency rate, as a percentage of outstanding balance, rose to 0.82% basis points from 0.71% the previous month. That jump also was the highest in its category for the past year.

The company’s credit score for consumers remained fairly stable, falling slightly but by only 0.2 points, such that it remained at a rounded 702. It was 4.5 points higher than a year earlier.

Originations trended slightly higher in the past month, according to VantageScore. 

“Even though June 2023 delinquency rates remained elevated, lenders did not shy away from making new loans,” said Susan Fahy, executive vice president and chief digital officer at VantageScore, in a press release.

All four categories of consumer credit tracked by VantageScore experienced slight consecutive-month gains in new originations, but the one seen in the mortgage sector was the smallest. The increases broke down as follows: personal loans, up 0.4%; credit card, 0.24%; auto, 0.13%; and mortgage, 0.05%. 

The mortgage gain may be particularly small because lenders have had relatively tight underwriting standards, a separate Mortgage Bankers Association study suggests.

The mortgage industry also tends to look to other consumer finance sectors for signs of potential performance concerns as credit issues tend to hit non-mortgage loans first. That’s because borrowers, with rare exceptions, generally prioritize home loan payments.

Banking regulators are considered likely to watch delinquencies and other credit indicators particularly closely right now as they’ve been working on updating their capital standards and related risk weightings.


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