The company’s PTI metric compares a borrower’s monthly debt obligation to their gross monthly income. Satyan Merchant (pictured top), SVP of auto and mortgage business leader at TransUnion, said it was essential to identify a leading indicator that could alert lenders and brokers to potential future mortgage trouble.
“The reason we even looked at this topic, which is mortgage delinquencies, is really because nobody else has been looking at it for a while,” Merchant told Mortgage Professional America. “Mortgage delinquencies are still relatively low, and that’s a good thing in the market. But we were at all-time lows not that long ago. We always want to keep an eye on the data and get ahead of the trend.”
Canary in the coal mine
The data compared the PTI of borrowers to mortgage delinquencies of the same borrower one year later. In March 2023, the PTI index was 2.18. By December, it had risen to 2.33. In March 2024, borrowers reaching 60 days past due (DPD) were 0.42%. By December 2024, that was up to 0.63%.
Again, the percentage of borrowers reaching 60 DPD was still very low. However, as household payments rose, that eventually affected the ability to make mortgage payments on time.
“Mortgage delinquencies have been ticking up in the last year or two,” Merchant said. “We wanted to see if there was any signal that we can find as an early warning sign, or canary in the coal mine in this current cycle. We honed in on the PTI metrics, not just for the mortgage itself, but PTI, across the wallet, which are the other different types of loan products that a consumer might have.
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