In its "first look" at November mortgage data last week Black Knight Financial Services noted a significant surge in mortgage delinquencies compared to the previous month. The 11.8 percent jump in mortgages that were 30 or more days past due brought the national delinquency rate to 6.08 percent, the first time since February it had surpassed 6.0 percent, and was the largest month-over-month increase since 2008, a spike that also occurred in November.
In the newest edition of its Mortgage Monitor Black Knight takes a closer look at the November anomaly, one that occurred even as the overall delinquency rate has continued to trend downward and despite the increase was 6 percent below its level a year earlier. According to the Monitor, a sudden rise in the delinquency rate in November is more rule than exception and, while this was the largest, increases have occurred in six of the last seven Novembers.
Black Knight said the November spike appears to have been calendar driven. There were two holidays (Veterans Day and Thanksgiving) during the month, as there always are in November, with Thanksgiving typically knocking out the following day for most people. This year the calendar placement of the holidays resulted in only 18 possible payment processing days. The month ended on a Sunday as did the five recent Novembers with the largest increase in delinquencies.
November also saw the highest one month volume of loans rolling from current to 30-days delinquent since June 2013. There were, in fact, increased roll-rates across all early stage delinquencies while rolls from delinquent to foreclosure status were still down.
The month also saw the lowest cure volume of any month in the last 10 years and the third lowest in the past 15 years. Black Knight aid the decreased rate of loans returning from delinquency to current status might be partially accounted for by the truncated payment processing period during the month.
This issue of the Monitor also contains an evaluation of the differences in the recovery of home prices by property price tier. Using its Home Price Index (HPI) the company put homes into five equal price tiers for every zip code it tracks. Tier 1 represents houses in the lowest 20 percent price range and Tier 5 is the top 20 percent by price.
According to Trey Barnes, Black Knight's senior vice president of Loan Data Products, "We looked at HPI appreciation from pre-crisis peaks to today in the 10 states currently trailing the furthest behind their pre-crisis housing maximums. The data showed a clear difference in the levels of recovery among home price tiers. Those in the lowest 20 percent of home values have been lagging behind their higher-valued counterparts in recovery to pre-crisis peaks, sometimes considerably.
"For example, in Nevada - overall, still more than 39 percent off its pre-crisis peak - properties in the lowest tier are nearly 47 percent off their peaks, as compared to 36 percent for those in the highest tier. In California, an even starker contrast emerges: properties in the highest tier have now come within just over 3 percent of their pre-crisis peak, while those in the lowest 20 percent are still almost 32 percent down. In many cases, these disparities between price tiers can be attributed to the fact that during the bubble, lower-tier properties appreciated at much higher rates than higher-valued properties and likewise fell harder and further when the bubble broke."
Finally, Black Knight looked at recent loan modification activity, noting that it had declined overall in 2014 and was down from its high periods during the year as well. The Home Affordable Modification Program (HAMP), jointly sponsored by the Departments of Housing and Urban Development and Treasury, was dwarfed by private lenders in the numbers of modifications it processed in the 2009-2011 period, but was responsible for over 50 percent of the total by November of 2014.
In addition to relative volume, the composition of investor types for which modifications were performed either by HAMP or through proprietary programs has shifted over the years as well. Loans owned or guaranteed by the government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae were the source of over 70 percent of the modifications facilitated by HAMP in 2009 but are primarily the province of proprietary programs today. The reverse has happened with VA and FHA loans which have gone from a negligible share of HAMP modifications in 2011 to over 70 percent in 2014.
HAMP modifications have always featured larger monthly payment reductions than their proprietary counterparts. As HAMP's client base has shifted toward the smaller VA/FHA loans these payment change amounts have decreased, but percentage reductions among HAMP modifications are also down.
HAMP modifications have always performed better than their proprietary counterparts in terms of redefaults, That gap has narrowed but still persisted in recent years, even as HAMP's mix has moved overwhelmingly toward the higher defaulting FHA/VA loans. However Black Knight notes that early data on 2014 HAMP modifications showed that vintage defaulting at a higher rate than modifications done in 2012 and 2013.
Step increases of interest rates on HAMP modifications began in the third quarter of 2014 although few loans have yet been affected. Black Knight said the impact of the payment hikes will be more apparent beginning with the first quarter of 2015 as the larger volumes of modifications done in 2010 hit their fifth year, the benchmark for many interest rate increases.