Mortgages were prepaid at a higher rate in August than at any time since 2005 according to the August Mortgage Monitor report issued by Lender Processing Services (LPS) on Wednesday. Prepayments are usually an indicator of home refinancing and the prepayments in August were higher even than those seen in the "mini-refinance waves" of both 2009 and 2010.
LPS Applied Analytics Senior Vice President Herb Blecher said that the impact of the prepayment increase has been both pronounced and broad based. "Our analysis showed an increase in prepayment activity across the entire combined loan-to-value (CLTV) continuum," he said. "While those loans with equity, particularly 80 percent CLTV and below, have much higher prepayment speeds, the impact of the Home Affordable Refinance Program (HARP) was also clear. Loans with a CLTV of more than 120 percent saw the greatest uptick - a 65 percent increase for the year to date. However, it is also becoming evident that loans originated in 2007 and earlier have diminished prospects for conventional refinancing opportunities. Fewer than 30 percent of these vintages remain both active and current, and on average, they are marked by larger negative equity positions and lower credit scores. That said HARP might yet represent a viable refi option for a good portion of this pool."
The U.S. loan delinquency rate fell 2.30 percent during the month to a rate of 6.87 percent. The current rate is 10.6 percent below that of one year ago, 7.69 percent. Continuing its decline, the inventory of loans 90 or more days delinquent is now almost 50 percent off its January 2010 peak. The bulk of the remaining inventory has now been past due for more than nine months, with a full 43 percent past due for 12 months or more. There are, however still, signs of ongoing modification activity in late-stage delinquency, with loans six or more months past due but not yet in foreclosure showing the greatest increase in cures from the prior month's status.
The foreclosure presale inventory rate was down 1.00 percent from July and 2.0 percent from a year earlier to 4.04 percent. This is the lowest point for the inventory since October 2010 but the average is misleading. In judicial foreclosure states the inventory is at a near record high of 6.49 percent while it is only 2.28 percent in non-judicial foreclosure states. Foreclosure sales were up 12 percent nationally in August, but remain 33 percent below their September 2010 peak.
Origination volume has recovered substantially from the low points reached in each of the last three years but still remains well below historic levels. July originations totaled 655,000, up 3 percent from June and 39.0 percent higher than one year ago.
Mortgage Monitor statistics are derived from the LPS database of loan level residential mortgage data and performance information on nearly 40 million loans across the spectrum of credit products.