Foreclosure starts hit an 18-year low in August and were down 23 percent compared to the previous August. Black Knight, in its First Look at August loan performance data, said there were 36,200 starts during the month, a 7.65 percent month-over-month decline. It was the fewest foreclosure starts since December 2000.
Starts were only one indication of the general improvement in mortgage delinquencies. The number of loans in active foreclosure, i.e. the foreclosure inventory, fell to 253,000, slightly less than a half percent of all mortgaged properties. This is 5,000 fewer than in July and down 28,000 loans from the level in August 2018. The inventory is now the smallest it has been since 2005.
The number of mortgages that were 30 or more days past due but not in foreclosure rose by 6,000 from July and was up 4,000 year-over-year. Black Knight notes that the number of outstanding mortgages nationally increased over the relevant time periods, therefore the delinquency rate fell 0.15 percent and 1.49 percent from the two earlier periods to a rate of 3.45 percent.
The number of serious delinquencies, loans 90 or more days past due but not in foreclosure, was unchanged at 444,000. This is 62,000 fewer serious delinquencies than a year earlier.
States with the highest percentage of non-current mortgages were Mississippi at 10.31 percent followed by Louisiana at 7.71 percent. Alabama, West Virginia, and Arkansas round out the top five, all with rates between 6 and 7 percent.
Black Knight calls the most recent prepayment rate the "latest sign of lower interest rates' impact on the market." Those prepayments, technically the Single Month Mortality (SMM) rate, rose by 5.45 percent compared to July, reaching a three-year high. The rate, 1.5 percent of all outstanding mortgages, is up 61.77 percent from the same time last year and is more than twice the 18-year-low rate in January of this year. Assuming 30 to 45 days to close a loan, the August prepayment activity reflects interest rates in June and July. Rates did not fall to recent lows until August and September which would indicate the SMM rate will fall still further.
In a separate news release, Black Knight noted another impact of rates on the market. The recent rise in those rates to an average of 3.56 percent during the week ended September 14, lowered the pool of "high quality" refinance candidates from a record high of 11.7 million to 9.8 million. A further 17 basis point increase last week reduced that to 8.3 million. The company defines the pool as homeowners who can both qualify for refinancing and save at least 0.75 percent on their rate by doing so. This, Black Knight says, is "another proof-point of just how sensitive to even slight rate movements this population is...as in the span of just two weeks 3.4 million people have lost the incentive to refinance."
Black Knight will provide more detail information on August loan performance in its Mortgage Monitor for that month. It will be released on Monday, October 7.