The July Mortgage Monitor report released by Lender Processing Services found that while loan origination volume had slowed slightly from May to June, overall activity remained relatively strong. According to LPS Data & Analytics Senior Vice President Herb Blecher, prepayment activity (historically a good indicator of mortgage refinances) is still largely driving origination volume, as has been the case for some time now.
“Prepayment speeds have been impacted by the sharp increase in mortgage interest rates we’ve seen over the last couple months,” Blecher said. “However, even with that increasing interest rate pressure, July’s monthly prepayment rates are still about where they were this time last year, when rates were at historic lows. In fact, they are roughly at the same levels as the heights of the ‘mini refinance booms’ in 2010 -- when interest rates were comparable to where they are today -- and in 2009, when rates were even higher. Of course, as interest rates continue to climb, we can expect that both prepayments and associated originations will decline. It’s notable however, that we saw an increase in prepayment activity in July among higher loan-to-value (LTV) mortgages -- those with LTVs of 100 percent or more -- indicating continued HARP refinance activity.
“With that in mind, we also looked at the delinquency rate for what are likely to be HARP loans 12
months after origination,” Blecher continued. “We found that while delinquencies were higher than 'traditional' (sub-80 percent LTV) GSE loans -- at approximately 1.2 percent -- this group is performing better than both precrisis GSE loans and post-crisis FHA loans (which both averaged four percent delinquency rates at 12 months of age). Overall, the data shows that the strong downward trend in delinquencies and foreclosures continues nationwide, with a decrease in foreclosure starts contributing to this improvement. For the year to date, 2013 has produced the lowest level of foreclosure starts since 2007. Given that nearly 50 percent of these are repeat foreclosures means that the picture is even more positive than a surface reading of the numbers might suggest.”