Mortgage Brokers’ Share of Conventional Conforming Loans Up

Loans Originated in 2012-2015 Have Performed the Best

By Archana Pradhan Real Estate, Risk Management

Mortgage brokers’ market share of conventional conforming mortgages hit 16% in 2019, up from a low of about 7% in 2011, according to CoreLogic TrueStandings (Figure 1). The loan-quality reputation of the broker channel had fallen during and immediately after the Great Recession as foreclosure rates jumped, leading some lenders to stop offering credit through brokers. The broker market share started to decline after 2008, but has gradually rebounded in the last couple of years and those loans are performing much better than the pre-crash loans.

Figure 1: Mortgage Brokers’ Market Share of Conventional Conforming Mortgages

The CoreLogic Loan Performance Insights Report analyzes mortgage performance for all home loans. Based on this report, the serious delinquency rate for July 2019 was 1.3%, down from 1.6% in July 2018.[1] The following extends the analysis in the report by disaggregating the performance data originated through mortgage broker channel.

Figure 2 compares serious delinquency rates for conforming conventional loans originated through broker channel with full documentation, loan-to-value (LTV) above 70% but no greater than 80% and debt-to-income (DTI) greater than 30% but no greater than 40%. The serious delinquency rate dropped by 0.2 percentage points down to 0.8 % in July 2019 from July 2018 and the rates are a 12-year low. 

Figure 2: Serious Delinquency Rate for Conforming Conventional Loans Originated Through Broker Channel: Full Documentation, LTV 70%+ - 80% and DTI 30%+ - 40%

A closer look reveals that today’s delinquency rate for all type of loans is heavily influenced by older loans. The bulk of the loans that were seriously delinquent were originated between 2003 and 2009. About 70% of the broker originated loans that were seriously delinquent in June 2019 were originated between 2003 and 2009 compared to just 16% of seriously delinquent broker loans originated between 2010 and 2019. Part of the reason why the serious delinquency share is significantly lower for mortgage broker loans originated in between 2010 and 2019 is that the share of mortgage broker loans originated in between 2010 and 2019 was just 16% compared with 47% for 2003-2009. Because today’s delinquency rate is heavily influenced by loans made before 2010, it can be a misleading guide of how newer broker originated loans are performing.

Figure 3 compares the serious delinquency pattern for conforming conventional loans originated through broker channel by vintage year. Each line in the figure represents the serious delinquency rate for conventional conforming loans originated in a given year as a function of number of months since the loan was originated. Analyzing these vintages imparts two important observations. First, delinquency rates were much higher for loans originated between 2006 and 2008. Performance of loans started to improve gradually beginning with the 2009 vintage as the underwriting standards tightened and the economic recovery began mid-2009.[2] Second, loans originated in 2010-2015 have performed the best, with the lowest 15-month delinquency rate in a decade. Overall, todays loans are performing much better than their pre-crash counterparts.

Figure 3: Serious Delinquency Rate for Loans Originated Through Broker Channel and by Loan Vintage for Conforming Conventional Loans with Full Documentation and LTV 70%+ - 80%

[1] Serious delinquency is defined as 90 days or more past due or in foreclosure proceedings.

[2] The National Bureau of Economic Research has identified the January 2008 through June 2009 period as an economic recession, and recovery began July 2009; see http://www.nber.org/cycles.html.

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