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Mortgage Delinquencies Hit 12-Year Low

October 21, 2019

Mortgage delinquency rates have hit their lowest point since the recession, according to new figures from the Federal Reserve. At 2.59% for the second quarter of 2019, the rate is at its lowest level since 2007.

 

That’s a strong indicator that the economy is not quite ready to enter into a recession, according to Stifel Chief Economist Lindsey Piegza. She told Yahoo Finance, “Mortgage delinquencies are not waving a red flag, at least not yet.”

 

“It’s worth noting that, post-crisis, mortgage debt has been highly constrained, producing an upward shift in mortgage credit quality — the current median FICO score of mortgage originations is over 750 versus ~700 pre-crisis,” wrote Morgan Stanley in a recent research note. “Unsurprisingly, delinquencies are low when lending in the largest segment of consumer debt [mortgages constitute 70% of consumer debt] is limited to high quality-borrowers.”

 

Additionally, there are not as many homeowners as there used to be. Homeownership rates fell to 64.1% currently from 69.2% during the pre-crisis high, according to Morgan Stanley. It also helps that those individuals who own are more educated and conservative when it comes to a home purchase.

 

To learn more about some of the driving factors behind the drop in delinquency rates, click on the image above. 

 

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