Pockets of weakness on Queensland coast and among self-employed, but mortgage delinquencies stabilising in Australia: Genworth

Apart from a few “pockets of weakness” mortgage delinquency rates have stabilised in Australia, according to lenders mortgage insurance (LMI) provider Genworth following the release of improved quarterly results.

The overall delinquency rate among the portfolio of loans Genworth insures decreased by 2 basis points to 0.52% as the Australian arm reported a profit of $US44 million for the June quarter, reversing a $US21 million loss in the previous quarter.

New delinquencies in the quarter totalled 3,556, up just one from 3,555 in the first quarter, but well down on the 3,983 new delinquencies reported in the second quarter of 2011.

Ellie Comerford, CEO of Genworth Australia, said new delinquencies were consistent with first quarter levels.

She said Australian business is on track to achieve its full year goals following a “solid performance” with the insurer benefited from refinancing activity.

Genworth and QBE LMI (formerly PMI) are the two biggest providers of LMI in Australia, which is insurance taken out by lenders to cover losses should a borrower default on their home loan. LMI is generally required to be paid by borrowers who borrow more than 80% of the value of their home.

Genworth has arrangements with around 100 lenders.

Comerford told Property Observer that one of the pockets of weakness remains the Queensland coastal market - despite the delinquency rate improving from 1.13% in the first quarter of the year to 1.05% in the second quarter.

Genworth paid out 128 lender claims on delinquent loans for properties on the Queensland coastal market, slightly down on the 128 paid in the previous quarter.

Comerford blamed the continued weakness on the Queensland coastal market on the high Australian dollar impacting on what is a heavily tourism-dependent region of the country.

The other pocket of weakness was small business owners and the self-employed (borrowers that usually take out higher interest low-doc loans), which she said continued to come under pressure.

Genworth paid 770 LMI claims in the second quarter of the year down on the 852 paid in the previous quarter, but nearly double (393) the number paid in the corresponding period last year.

The average value of claims also increased from $77,000 to $91,000 quarter-on-quarter.

“Paid claims were elevated in second quarter, but we are working with lenders and borrowers and expect reductions in the coming year,” Comerford said.

On a state-by-state basis the highest delinquency rates were recorded in Queensland (0.76%) – though the sunshine state’s delinquency rate improved from 0.8% in the first quarter of 2012 with the lowest delinquency rate in Victoria (0.36%).

The other states where Genworth provides LMI were all in line with the national average.

Genworth also recorded an improvement in the 2007-2008 GFC vintage delinquency rate from 1.25% to 1.17%.

The global Genworth business- including its main US business posted a profit of $US76 million for the second quarter following a loss of $US136 million in 2011.

New US delinquencies fell from 17,430 in the first quarter to 16,167 in the second quarter – the fourth straight quarterly decline.