ATLANTA (4/19/13)--U.S. home finance balances written off in the first quarter totaled $43.1 billion, a decrease of nearly 23% from first quarter 2012 ($55.4 billion), according to the Equifax March National Consumer Credit Trends Report
. That reflects a five-year low.
Write-offs, also known as severe derogatories, include loans that completed the foreclosure process and transitioned to real-estate owned (REO) by banks, entered bankruptcy, or were otherwise charged off by the lender.
"Overall home finance balances decreased to $8.38 trillion in March 2013 from $8.64 trillion the same time a year ago," said Equifax Chief Economist Amy Crews Cutts. "The decline is due to write-offs from foreclosures as well as from consumers paying down balances when refinancing, known as cash-in refinancing, shortening terms when they refinance their loans or making extra principle payments each month for faster amortization; some have even paid-off their mortgages entirely.
"The share had been running 50-50 until recently when it has shifted to a 60-40 split with write-offs dominating," she added. "This shift is important as increased home purchases are finally leading to more demand for mortgage credit and may soon stop the decline in mortgage debt outstanding."
Year-over-year change in home finance write-off rates from March 2012 to March 2013 were:
Home equity revolving: Declined 44.1%;
Home equity installment: Dropped 32.9%; and
First mortgage: Fell 17.6%.
Year-over-year change in home finance severely delinquent balances during the period were:
Home equity revolving: Decreased more than 29% (to $9.7 billion from $13.6 billion);
Home equity installment: Fell nearly 26% (to $4.9 billion from $6.6 billion); and
First mortgage: Dropped nearly 25% (to $355 billion from $477 billion).