by Dr Thomas J Healy, CMB

Are cracks appearing in the credit armor?

Wednesday, September 28, 2022

Delinquency rates are increasing at a fairly slow but steady rate.  The overall delinquency percentage on 20MM FNMA/GNMA loans increased from 2.78% in March to 3.03% today (25 basis points).  There are two points of additional concern:

1) As the index graph above shows, there is a wide dispersion of results by FICO band.  Low FICO loan deliquency rates have increased 15% over these six months.  Credit stress tends to start with the lower credit loans.  Whether it spreads to the higher bands is a possible concern.

2) While total delinquencies are up 25bps, the "feeder" group (1 and 2 pays delinquent) are up 44 basis points.

No point for alarm yet, but we will be watching this trend closely.  

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