Monday, August 01, 2016

Black Knight June Mortgage Monitor: "Brexit’ Effect Increases Refinanceable Population to 8.7 Million"

by Bill McBride on 8/01/2016 07:01:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for June today. According to BKFS, 4.31% of mortgages were delinquent in June, down from 4.79% in June 2015. BKFS also reported that 1.10% of mortgages were in the foreclosure process, down from 1.56% a year ago.

This gives a total of 5.41% delinquent or in foreclosure.

Press Release: Black Knight’s Mortgage Monitor: ‘Brexit’ Effect Increases Refinanceable Population to 8.7 Million; Auto Debt Among Mortgage Holders at Highest Level in at Least 10 Years

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 June 2016. After the United Kingdom voted to leave the European Union on June 23, 2016, increased investor interest in U.S. Treasury Bonds again drove down mortgage interest rates. In light of this development, Black Knight analyzed the effect that new multi-year lows in rates are having on the population of 30-year mortgage holders who could both likely qualify for and benefit from refinancing. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, in the current rate environment, the effect of even slight declines in mortgage interest rates have proven to have far-reaching impact on the refinanceable population, though much less than one might think on home affordability.

“The reality is that, post-‘Brexit,’ mortgage interest rates declined by about 15 basis points – not significant in the grand scheme of things,” said Graboske. “But for 2.8 million borrowers with current rates right at 4.25 percent, this modest decline was enough to put them 75 basis points above today’s prevailing rate, the point at which we consider a borrower to have incentive to refinance. Of these, 1.2 million also meet broad-based eligibility criteria -- loan-to-value ratios of 80 percent or less, credit scores of 720 or higher and are current on their mortgage payments -- bringing the total refinanceable population to 8.7 million, the highest level we’ve seen since late 2012. However, unlike the 66 percent of borrowers Black Knight identified a few months ago, who could have both likely qualified for and had incentive to refinance in the spring of 2015 but for whatever reason didn’t do so, the vast majority of these new candidates did not have such incentive last year. This has produced a nearly 50 percent increase in the number of borrowers with newfound incentive to refinance, which may well be creating a more pronounced impact on refinance applications and originations as these borrowers rush to take advantage.”
emphasis added
BKFS Click on graph for larger image.

This graph from Black Knight shows new seriously delinquent loans by vintage.  New delinquencies are still coming mostly from bubble-era legacy loans.

From Black Knight:
• Just over 210,000 borrowers that entered 2016 current on their mortgage payments are now 60 or more days delinquent; this is 17,000 below last year, but still about 10 percent above historical standards

• Nearly 60 percent of new seriously delinquent loans are coming from pre-crisis vintages (2007 and earlier), despite those vintages making up just 26 percent of active mortgages

• Over the first half of 2016, one of every 100 borrowers in a pre-2008 vintage mortgage that was current at the beginning of the year is now 60 or more days past due, as compared to just three out of every 1,000 borrowers in a 2008 or later vintage
BKFSThe second graph shows foreclosure starts. From Black Knight:
• Total foreclosure starts have now reached historic norms, with Q2 2016 starts volume hitting an 11-year low

• Over 55 percent of foreclosure starts continue to be repeats as the industry continues to work through lingering inventory from the crisis

• Looking specifically at first time foreclosure starts, Q2 2016’s 84,300 first time foreclosure starts represent a 20 percent decline from Q2 2015 and the lowest volume seen on record since at least 2000

• The second lowest quarter on record for first time foreclosure starts was Q1 2016, and Q2 represented a 16 percent decrease from that point

• April 2016 saw the lowest total foreclosure starts in 11 years and the lowest one-month volume of first time starts on record
Still working through the backlog, but almost back to normal.  There is much more in the mortgage monitor.