Rising delinquency rates challenge mortgage lenders’ ability to avoid risk

Delinquency Software

As delinquency rates begin to creep up, banks are finding it more important to work with customer management software to analyze loan portfolios and avoid issuing risky loans that may hurt a bank’s solvency.

A number of studies have shown that September, a month typically known to experience increased delinquency rates, had the highest monthly increase in mortgage delinquency rates since 2008. Before now, delinquency rates, or rates of mortgage payments that are overdue by 60 days, had been falling consistently .

LPS, the data analytics company that produced the study, found that in September the rate of delinquency increased by 7.7 percent since August of this year. This is both higher than not only a typical month-to-month change, but also higher than a typical September. In general, September is known for higher rates than normal because of the fewer amount of business days.

However, by no means does this necessarily reflect a trend in delinquency rates — the number of delinquencies are still lower than they were in January 2010, when rates began to fall.

Separately, Freddie Mac also confirmed an increase in mortgage delinquencies in September. The government-backed enterprise found the rate in single-family mortgage delinquencies increased since last month, and also since the beginning of this year.

Though rising delinquency rates are not considered a trend, these findings point out the number of exceptions and surprises in the mortgage industry. Risk assessment tools and application processing software can help banks be especially aware and keep delinquency rates to a minimum.

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