The data and analytics division of Black Knight Financial Services has released its latest Mortgage Monitor Report, looking at data as of the end of May 2014. An analysis of the month’s mortgage performance data showed that—in a reversal of an eight-month trend—foreclosure starts increased by 9.5 percent in May. However, as Kostya Gradushy, Black Knight’s manager of Loan Data and Customer Analytics points out, this increase must be seen in the proper context.
“While foreclosure starts did rise over nine percent in May, it’s important to remember the historical trend is still one of improvement,” said Gradushy. “On a year-over-year basis, January through May foreclosure starts were still down 32 percent, and we are still looking at the lowest level of foreclosure starts in seven years. Additionally, over half of these starts are repeat foreclosures, rather than new entries into the pipeline, That is, these are loans that had been in foreclosure, shifted back to either current or delinquent status by way of modification, repayment plan or some action by the borrower, but have now fallen into foreclosure once again. Almost 80 percent of May’s foreclosure starts were from 2008 or earlier vintage loans. Only one state -- New Jersey -- saw foreclosure starts increase as compared to the same period last year."
“Given that mortgage interest rates were at their lowest point in seven months, Black Knight also saw monthly prepayment speeds -- historically a good indicator of refinance activity -- rise again for the third consecutive month. Looking at this situation at a more granular level, we found that although prepayment rates actually declined on 2008 vintage loans, that year’s mortgages still represent the highest total rate of prepayments. For 2009 through 2013 vintages, prepayments were up across the board over the past few months.”
Though refinance activity is still down significantly from the levels seen in 2012 and early last year, it has increased 21 percent since January 2014. Black Knight also found that seasonal purchase activity has picked up, with approximately 897,000 purchase originations through April, a level on par with 2013 (898,000 over the same period), and better than 2012 (847,000). Overall, credit standards do not seem to be easing, as both average loan-to-value (LTV) ratios and credit scores on both purchase and refinance originations remain relatively strict and essentially unchanged.
Finally, home price appreciation continues to help drive down the share of borrowers underwater on their mortgages. As of April, the share of loans in negative equity positions had declined to 8.9 percent. However, the situation is significantly worse for loans either seriously delinquent (90 or more days past due) or in foreclosure. Black Knight found that 78 percent of this subset of distressed loans had combined loan-to-value ratios of 100 percent or more.
As was reported in Black Knight’s most recent First Look release, other key results include:
Total U.S. loan delinquency rate: 5.62 percent
Month-over-month change in delinquency rate: -0.01 percent
Total U.S. foreclosure pre-sale inventory rate: 1.91 percent
Month-over-month change in foreclosure pre-sale inventory rate: -5.56 percent
States with highest percentage of non-current loans: MS, NJ, FL, NY, LA
States with the lowest percentage of non-current loans: AK, MT, CO, SD, ND
States with highest percentage of seriously delinquent loans: MS, NV, AL, RI, MA