Subprime and near-prime mortgage originations have increased in 2016, according to data recently released in TransUnion’s Q3 2016 Industry Insights Report. Subprime originations reached 64,000 in the second quarter of 2016, hitting their highest level in seven years. This was an over-the-year increase of almost 11 percent and the highest number since the fourth quarter of 2009. Near prime originations also climbed this year, totaling 262,000— a 5.7 percent over-the-year increase and the highest level since the recession.
While risky subprime lending practices helped contribute to the housing market crash, TransUnion said they do not see a cause for concern with the increase in subprime originations. Subprime and near prime loans make up a small percentage of overall originations. Overall, mortgage originations reached 1.99 million in Q2— a 3.7 percent over-the-year increase.
Additionally, the subprime origination market isn’t the same as it was in the past. While subprime lenders cater to borrowers that don’t qualify for conventional loans, reputable lenders like Athas Capital Group do not engage in shifty practices that ultimately led to the financial crisis. Athas Capital Group is a direct lending platform and one of the leading subprime lenders in the country.
In the third quarter, total mortgage balances rose 1.7 percent to $8.25 billion, according to the report. This increase can be attributed to the sustained availability of low interest rates supporting origination growth, as well as higher home values and higher average loan amounts. In addition, the quality of mortgage loans improved in Q3; the delinquency rate fell 8.4 percent to 2.29 percent, the lowest level since 2009.