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The Data & Analytics division of Black Knight Financial Services (BKFS) has released its latest Mortgage Monitor Report, based on data as of the end of September 2014. Using Black Knight's first and second lien mortgage databases, and leveraging data from its Home Price Index, the company analyzed the current active mortgage population to investigate both the state of the 'refinancible' population as well as of the nation's current equity situation. According to Trey Barnes, Black Knight's senior vice president of Loan Data Products, recent reductions in the average 30-year mortgage interest rate have expanded the population of borrowers who could benefit from refinancing by nearly 25 percent.
"Before the most recent reductions in the average 30-year mortgage interest rate, approximately six million borrowers met broad-based 'refinancibility' criteria," said Barnes. "These criteria assume loan-to-value ratios of 80 percent or below, good credit, non-delinquent loan status and current interest rates high enough that borrowers have an incentive to refinance. In light of where rates are today, and looking at borrowers with current notes at 4.5 percent and above, that population has now swelled to 7.4 million—almost a 25 percent increase. This is a relatively conservative assessment though, as those with current rates of 4.25 to 4.5 percent could arguably benefit from refinancing as well. That group adds another 1.7 million borrowers to the population."
BKFS also looked again at currently active home equity lines of credit (HELOCs), and—based on estimated 10-year draw periods—found that only 7.74 percent of active HELOCs had begun amortizing entering 2014. Through 2018, nearly an additional 80 percent will end their draw periods, resulting in average payment increases (or "payment shock") of $262 per month. The most effective way of avoiding payment shock is to refinance a HELOC into a new loan or line of credit, but nearly 30 percent of HELOCs set to reset through 2018 are either in negative equity or near negative equity positions, making refinancing problematic.
"On a related note, we also examined how the equity situation in America has changed since we last looked," said Barnes. "Due in no small part to 28 consecutive months of home price appreciation since 2012, we've seen the share of borrowers with negative equity drop down to just below eight percent as of July, down from a level of 33 percent at the end of 2011, and to its lowest point since 2007. An additional 8.5 percent of borrowers are in 'near-negative equity' positions, with less than 10 percent equity in their homes. However, more than half of all borrowers have 30 percent or more equity, a level not seen in nearly eight years."
As was reported by BKFS, key results include:
►Total U.S. loan delinquency rate: 5.67%
►Month-over-month change in delinquency rate: -3.90%
►Total U.S. foreclosure pre-sale inventory rate: 1.76%
►Month-over-month change in foreclosure pre-sale inventory rate: -2.20%
►States with highest percentage of non-current loans: MS, NJ, LA, NY, FL
►States with the lowest percentage of non-current loans: MN, MT, CO, SD, ND
►States with highest percentage of seriously delinquent loans: MS, AL, RI, LA, MA