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by Ryan Smith 20 Sept 2020

The total percentage of consumers in “financial hardship” status for mortgages, auto loans credit cards and personal loans dropped last month, according to a new study by TransUnion – the first such decrease since the beginning of the COVID-19 crisis. The mortgage industry has weathered financial challenges well throughout the pandemic, the study found.

TransUnion defines financial hardship by factors such as deferred payments, whether a customer is in a forbearance program, frozen accounts or frozen past-due payments. Financial hardship status often allows consumers to avoid being considered delinquent. In an email to MPA, the credit-reporting agency found that while fewer accounts are in financial hardship lately, credit performance has continued to hold steady and has not shown a material deterioration.

“Overall, the consumer credit market has been performing quite well despite the obvious challenges brought on by the COVID-19 pandemic,” said Matt Komos, vice president of research and consulting at TransUnion. “It’s a reassuring sign that delinquency levels have remained relatively low – especially as the percentage of consumers in financial hardship has started to decline. While we expect to see future delinquencies ris based on macroeconomic factors, it’s clear that government stimulus programs and accommodation programs provided by lenders are helping the market withstand these challenges in the near term.”

According to TransUnion, the share of mortgage borrowers in financial hardship status dropped to 6.15% last month from 6.70% in June. That’s also down from the May peak of 7.48%. Historically low interest rates also boosted origination volumes in the first half, especially for refinances, TransUnion said.

Originations hit 2.2 million in Q1, 80% higher than the same period in 2019. Of those originations, 51% were purchase loans and 49% were refinances. Last year at the same time, only 26% or originations were refinances.