Oct 31 2016 18839 1

Dated: 10/31/2016

Views: 2531


2.5M foreclosed owners qualify for a mortgage again

 

COSTA MESA, Calif. – Oct. 28, 2016 – With the economy rebounding and the average national credit score on the rise, many consumers are coming back from harder times, dusting themselves off and re-entering the mortgage market.

Foreclosures, short sales and bankruptcies remain on a credit report for seven years, which means those black marks will fall off the credit files of 2.5 million consumers between June 2016 and June 2017. And most will then qualify for another mortgage.

Experian's latest analysis finds that 68 percent of these rebounding consumers are scoring in the near-prime-or-higher credit segments.

The study takes a close look at these potential borrowers and the consumers who foreclosed or short-sold between 2007 and 2010 and have since opened a new mortgage. According to Experian, these "boomerang borrowers" generally show responsible credit behaviors, have improving credit scores and are current on their debts. Overall, the short-sale ex-owners are rebounding at a higher rate than those who went through foreclosure.

Report highlights

  • Nearly 29% of those who short-sold between 2007 and 2010 have a new mortgage

  • Just 1.5% of the short-sale group is delinquent on their mortgage – below the national average of 2.8%

  • The average for this group's auto loan delinquency is 1.2%, compared with the national average of 2.2%; for bankcards it's 3% compared to the national rate of 4.3%

  • More than 12% of those who went through foreclosure have since opened new mortgages and show positive signs when it comes to credit management

  • Just 3% of the past-foreclosure group is delinquent on a mortgage

  • The past-foreclosure people are also just below the national average when it comes to delinquency rates, at 1.9% on auto loans; bankcard delinquency rates are a little higher at 4.1%

"With millions of borrowers potentially coming back into the housing market, the trends that we're seeing are promising for both the mortgage seeker and the lender," says Michele Raneri, vice president of analytics and new business development at Experian.

"In the coming years, boomerang borrowers will be a critical segment of the real estate market," Raneri predicts. "While many of these borrowers have gone through a very difficult time, it is encouraging to see them taking control of their finances with better credit scores and all-around better credit management."

The VantageScore credit scores of the boomerang buyers have climbed significantly since their foreclosures and short sales, even surpassing the scores they had prior to the negative event:

  • Consumers who had a foreclosure and have subsequently opened a mortgage have an average credit score of 680 – an increase of 20.8% compared with their scores at the time of foreclosure

  • Consumers who had a short sale and have subsequently opened a mortgage have an average credit score of 706 – an increase of 16.5% compared with the scores at the time of short sale

© 2016 Florida Realtors®

  Related Topics: Trends

  • Florida Realtors® Headquarters - Orlando: (407) 438-1400

Office of Public Policy - Tallahassee: (850) 224-1400

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