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According to the Office of the Comptroller of the Currency (OCC), borrowers are doing a much better job of keeping their mortgages current and staying away from foreclosure. That’s great news for the banks that participated in the OCC survey and that service these loans. The report also indicates that foreclosures have declined in the past year by about 1.6%.
However, since the non-bank share of agency purchased mortgages continues to increase the total of loan serviced by the reporting banks only makes up about 36% of all residential loans outstanding. This may indicate that with the bank’s eye toward taking less risk they may be leaning toward more qualified borrowers and leaving the riskier consumers for the non-banks to handle.
With many banks, especially those included in this survey, shying away from FHA financing, non-bank lenders are picking up the slack. This increases the risk associated with lending to more low to moderate-income borrowers and first-time homebuyers. Although, many lenders are reporting, new FHA loans are performing better as well.
Now that many of the problem loans left over from the crash of 2008 have worked their way through the system, it seems the newer loans originated over the past few years are doing much better. Maybe, the trend toward originating higher quality loans, with better credit scores, and consumers with some homeownership experience is paying dividends.
Hey, maybe there is something to this ‘quality’ thing after all. Better quality loans, to better quality borrowers, result in better performing loans, fewer defaults, and fewer foreclosures. All of which is good for consumers, lenders, the housing market, and the economy.
So, let’s stay on the right path. Keep the quality in loan production. The results have shown that it is well worth the time, effort and investment.
Are you sure you’re producing quality loans?
