by John Alonge

Delinquency Migration

Wednesday, July 27, 2022

This is very interesting!  It shows a six-month average of the percentage of 14MM conventional loans that moved from current to one month delinquent, then one to two, and so-forth.  I compared primary occupancy loans (high and low FICO) and investor owned property loans (high and low FICO). 

As would be expected, the low FICO loans had a higher migration in the 0-1 and 1-2 categories.  However, once a loan is 2 month's delinquent the dynamics change dramatically. 

Within these 2 months delinquent loans, the high FICO primary occupancy loans are much more likely to migrate towards default than investor mortgages and lower FICO mortgages. The latter categories tend to converge.

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