Mini-Refi Wave Drives Prepayments to Highest Levels Since 2005 – NMP Skip to main content

Mini-Refi Wave Drives Prepayments to Highest Levels Since 2005

NationalMortgageProfessional.com
Oct 03, 2012

The August Mortgage Monitor Report released by Lender Processing Services Inc. (LPS) shows a significant increase in prepayment rates in August—a key indicator of refinance activity. Prepayment rates in August rose above those seen in the "mini-refinance waves" of both 2009 and 2010, hitting their highest levels since 2005. LPS Applied Analytics Senior Vice President Herb Blecher explained that the impact of this 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," Blecher 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." Foreclosure inventory in August remained more than eight times the 1995-2005 pre-crisis period, despite national foreclosure inventory dropping to the lowest point since October 2010. The national foreclosure average masks the stark difference between judicial and non-judicial foreclosure states. In judicial states, foreclosure inventory was at a near-record high of 6.49 percent (despite a 14 percent month-over-month increase in judicial state foreclosure sales), as opposed to 2.28 percent in non-judicial states. Overall, foreclosure sales were up 12 percent nationally in August, but remain 33 percent below their September 2010 peak.
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