Monday, July 11, 2016

Black Knight: "425,000 Borrowers Out from Underwater on Mortgages" in Q1

by Bill McBride on 7/11/2016 08:01:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for May today. According to BKFS, 4.25% of mortgages were delinquent in May, down from 4.91% in May 2015. BKFS also reported that 1.13% of mortgages were in the foreclosure process, down from 1.59% a year ago.

This gives a total of 5.38% delinquent or in foreclosure.

Press Release: Black Knight’s Mortgage Monitor: Tappable Equity Rose by $260 Billion in Q1 2016, 425,000 Borrowers Out from Underwater on Mortgages

Today, the Data & Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of May 2016. This month, the Mortgage Monitor leveraged data from the Black Knight Home Price Index to revisit the U.S. equity landscape in light of 48 consecutive months of annual home price appreciation (HPA). As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, the impact can be observed in terms of both levels of tappable equity available to borrowers as well as the continuing reduction in the number of borrowers who owe more than their homes are worth.

“As we approach the 10-year anniversary of the pre-crisis peak in U.S. housing prices, we’re just under 3 percent off that June 2006 peak nationally, and 23 states have already passed their 2006 peaks,” said Graboske. “The result is that equity levels are rising nationwide for the most part. In Q1 2016, 425,000 borrowers who had been underwater on their mortgages regained equity, bringing the national negative equity rate down to just 5.6 percent. That’s a far cry from the nearly 29 percent of borrowers who were underwater at the end of 2012, but still about five times as many as in 2004. The first quarter also saw tappable equity grow by $260 billion – a six percent increase in just the first three months of the year. There are now 38 million borrowers who have at least 20 percent equity in their homes, with an average of $116,000 in tappable equity per borrower. It seems borrowers are still being prudent when it comes to drawing upon that equity, though. Just $20 billion in equity was tapped via cash-out refinances in Q1 2016 -- roughly one-half of one percent of total available equity. Even so, cash-outs still accounted for some 42 percent of all refinance activity in Q1 2016.”
emphasis added
BKFS Click on graph for larger image.

This from Black Knight shows the number, and percent of borrowers, with negative equity since 2005.

From Black Knight:
• Home prices rose by two percent in Q1 2016, helping 425K borrowers to regain equity; 2.8 million borrowers remain underwater, nearly 5x as many as in 2004

• The national negative equity rate now stands at 5.6 percent, a 13 percent decrease from last year and down from a high of nearly 29 percent of all borrowers at the end of 2010

• Nevada has the highest negative equity rate at 12 percent, followed by Missouri and Rhode Island at 11 percent each, while Colorado and Texas have the lowest negative equity rates in the country at less than one percent

• Based on research published in the February 2016 Mortgage Monitor MM, at the current rate of recovery, negative equity will return to 2005 levels (~750K borrowers) in late 2018, though it will take over two years longer for the low end of markets across the country to recover than high end homes
There is much more in the mortgage monitor.