Mortgage originations are at their
lowest level in nearly 10 years Black Knight Financial Services said today. Mortgage originations fell to 238,000 in
February, the last month for which data is available, compared to 358,000 in
January and 781,000 12 months earlier. High LTV refinancing, that is GSE Streamline
loans and Home Affordable Refinance Program (HARP) loans have driven much of
the decline. There were an estimated
35,000 of those loans originated in February compared with 155,000 at their
high point in May 2013.
Government-backed loans have shrunk the most
with portfolio lending increasing slightly.
Private investment in mortgages remains at insignificant levels.
The foreclosure process used in a state -
whether it involves the court in a judicial proceeding or allows the seizure of
a home without court permission, a non-judicial process - has been blamed for discrepancies
among the states in foreclosure timelines and backlogs and wildly varying
delinquency statistics. Now Black Knight
Financial Services is pointing to another possible offshoot of the judicial
process, a higher level of negative equity.
Negative equity, the percentage of
homeowners with a mortgage who owe more on that mortgage than the home is
worth, has declined to a national rate of about 10 percent from a high of near
35 percent during several periods in the financial crisis. While the rate of negative equity in both
judicial and non-judicial states have moved in parallel throughout the last six
years, the rate in judicial states has always been higher and is now about 40
percent above that in non-judicial states.
"Two years of relatively
consecutive home price increases and a general decline in the number of
distressed loans have contributed to a decreasing number of underwater
borrowers," said Kosya Gradushy, Black Knight's manager of Loan Data and
Customer Analytics. "Looking at current combined loan-to-value (CLTV), we
see that while four years ago 34 percent of borrowers were in negative equity
positions, today that number has dropped to just about 10 percent of active
mortgage loans. While negative equity levels have declined for both judicial
vs. non-judicial foreclosure states from the peak of the crisis, non-judicial
states are now at just under eight percent, as compared to 13.4 percent in
their judicial counterparts. Overall, nearly half of all borrowers today are
both in positive equity positions and of strong credit quality - credit scores
of 700 or above. Four years ago, that category of borrowers represented over a
third of active mortgages.
A decline in negative equity of course usually means an increase in housing
prices and Black Knight, in its most recent Mortgage
Monitor Report points to another correlation, that between its Home Price
Index (HPI) and declining rates of delinquencies in the various states. Where home prices have risen sharply there
has been a corresponding drop in delinquencies - or vice versa. Of course those states that are the greatest
outliers on both counts - with dramatic price increases and strongly improving
delinquency rates - are those that had the most severe downturn in price and
the greatest numbers of foreclosures - Arizona, Nevada, California, Georgia,
Florida, and so forth.
Black Knight notes that delinquencies
fell in March by a greater degree than they have in three years and other
indicators are also pointing to a healthier housing market. New problem loans, foreclosure starts, and
foreclosures are now at their lowest levels since before the beginning of the
Loans in the foreclosure process
continue to age. Gradushy said, "Black
Knight has also observed the timelines associated with loans in foreclosure
continuing to expand over time, reaching an average of 966 days delinquent for
those in the foreclosure process. In fact, 55 percent of all loans in
foreclosure are now more than two years delinquent -- an all-time high. The
average length of delinquency for completed foreclosures is quite comparable at
955 days. However, as a share of total aged inventory, fewer of these loans are
completing the foreclosure process. While it may seem counterintuitive, this is
actually also indicative of an improving market. As there are fewer new
foreclosure starts, not as many new problem loans, declining delinquencies and
improving indicators all around, what's left are these loans lingering -- for
years -- in the foreclosure pipeline."
Black Knight also found home
affordability (calculated as a ratio of mortgage payment to income) better now
than it was in the years prior to the housing crisis, though the level of
affordability varies by state. At the national level, the mortgage-to-income
ratio now stands at 22 percent, whereas in 2006, only four states were below
this level. As of March, nearly two-thirds of the country fell below this line:
Michigan, Missouri, Indiana and Iowa were the most affordable states, whereas
New York and California were the least affordable.