prepayments have picked up over the last three months as interest rates pulled
back from recent highs. Black Knight
Financial Services said today that the rate of prepayment which is closely
associated with refinancing, was at 0.9 percent in May. The rate had dropped to around 0.6 percent at
the end of 2013 and the beginning of this year.
Knight's monthly Mortgage Monitor
pointed to the 2008 vintage of mortgages as having the highest refinance rate,
hovering around 1.5 percent in both April and May. While pre-2008 vintages had interest rates
higher than the 5.63 percent average (based on a 30-year fixed rate mortgage) of
loans originated in 2008, the rate of prepayment was lower, around 1.1
percent. Prepayment rates for post 2008
vintages, while much below that of 2008 and the average interest rates much
lower, trended higher as well over the March to May period.
Though refinance activity is still
down significantly from the levels seen in 2012 and early last year, it has
increased 21 percent since January 2014. Black Knight also found that seasonal
purchase activity has picked up, with approximately 897,000 purchase
originations through April, a level on par with 2013 (898,000 over the same
period), and better than 2012 (847,000).
Credit scores for both purchase and
refinance loans remain largely unchanged as do loan-to-value standards with two
exceptions. Credit scores for Freddie
Mac and Fannie Mae (GSE) refinancing and refinancing through GNMA have dipped
appreciably since last fall.
In the full Mortgage Monitor Black Knight expanded on foreclosure data it
released last month in its "early look."
starts reversed an eight month trend in May, rising 9.5 percent in May to
86,000. Even with the increase,
foreclosure starts are down 32 percent from the same period in 2013 and are at
the lowest point since 2007. New Jersey
was the only state where foreclosure starts in May exceeded those in May 2003. Foreclosure
starts peaked nationally in May 2009 at 316,000. As has
almost always been the case throughout the foreclosure crisis, most starts are
on loans that have been delinquent for a protracted period of time.
"While foreclosure starts did rise
over 9 percent in May, it's important to remember the historical trend is still
one of improvement," said Kostya Gradushy, Black Knight's manager of Loan Data
and Customer Analytics. "On a year-over-year basis, January through May
foreclosure starts were still down 32 percent, and we are still looking at the
lowest level of foreclosure starts in seven years. Additionally, over half of
these starts are repeat foreclosures, rather than new entries into the
pipeline, That is, these are loans that had been in foreclosure, shifted back
to either current or delinquent status by way of modification, repayment plan
or some action by the borrower, but have now fallen into foreclosure once
again. Almost 80 percent of May's foreclosure starts were from 2008 or earlier
Completed foreclosures or
foreclosure sales were less than half of starts and continued their downward
trend. Sales totaled 42,000,
representing a 3.4 percent decrease from April and down from a peak of 124,000
sales in September 2010.
The foreclosure inventory also
continued to shrink and was down to 1.91 percent of mortgaged properties in
May. Delinquencies are also at 6-year
lows. After peaking at 10.57 percent in
January 2010, the national delinquency rate is now 5.62 percent.
Home price appreciation continues to
help drive down the share of borrowers underwater on their mortgages. As of
April, the share of loans in negative equity positions had declined to 8.9
percent. However, the situation is significantly worse for loans either
seriously delinquent (90 or more days past due) or in foreclosure. Black Knight
found that 78 percent of this subset of distressed loans had combined
loan-to-value ratios of 100 percent or more.
Finally, the Mortgage Monitor said there is a growing lack of incentive for
current homeowners to sell their homes.
Man, even where equity is positive, do not have significant enough to allow
for a downpayment on a trade-up home. Others
have current low interest rates they would not be able to match with a new
purchase loan. For an estimated 49
percent of homeowners, both of those disincentives apply.