Realty News

New Data On Subprime Borrowers Show Trends on Repayment

April 19th, 2007 | Category: Real Estate News

Experian has released a trend report on the subprime borrower and their repayment habits and it has shown some very interesting trends. The subprime borrower is much more worried about how they repay their credit cards than their mortgages. Most prime borrowers concentrate on paying ones mortgage first and then paying their credit cards. However, for those that are cronically in the subprime designation, protecting their credit cards is more important than saving their house.

This is an interesting trend both sociologically and structurally for the economy. One would think that the some of the people who purchased homes at the low end thought that they were a low cost opportunity for the short term as opposed to the ownership of a home and building equity.

Hat tip to Lending Clarity for finding this article. Go read their analysis of what the Experian report reveals.

In a challenge to conventional wisdom, Experian found that subprime consumers are 30 days or more delinquent on mortgage debt more often than they are delinquent on unsecured, bankcard obligations. Historically, consumers have paid mortgage debt over bankcard debt as people traditionally view their home as their most valuable asset which should be protected at all costs.

The new findings held true only for those consumers who are in the subprime segment, defined by Experian’s credit score of 620 or lower. Consumers with credit scores considered to be “prime”—above 680—continued to follow traditional historical patterns of paying mortgage debt before bankcard debt. Other findings of Experian’s analysis:

Subprime consumers are now delinquent on mortgage debt more often than unsecured bankcard debt.

For subprime consumers, the mortgage delinquency rate has grown at 13.2 percent over the past four years.

The same delinquency trends are present across each geographic region in the US.

The western region experienced the sharpest growth in delinquencies—15.3 percent for mortgage and 6.4 percent for bankcard.

Between 2005 and 2006, outstanding mortgage balances for subprime consumers increased 8.8 percent while total mortgage outstanding balances only grew by 3.3 percent. via the Experian Global Press Office.