Monday, December 09, 2019

Black Knight Mortgage Monitor for October; Cash-Out Refinances Increase

by Calculated Risk on 12/09/2019 09:51:00 AM

Black Knight released their Mortgage Monitor report for October today. According to Black Knight, 3.39% of mortgages were delinquent in October, down from 3.64% in October 2018. Black Knight also reported that 0.48% of mortgages were in the foreclosure process, down from 0.52% a year ago.

This gives a total of 3.87% delinquent or in foreclosure.

Press Release: Black Knight Mortgage Monitor: Servicer Retention Rates Fall in Q3 2019 Despite Refinance Volumes Hitting Highest Point in Nearly Three Years

Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. This month, in light of the recent surge in refinance volumes, Black Knight looked at how servicers’ retention rates of refinancing borrowers have fared. As Black Knight Data & Analytics President Ben Graboske explained, despite refinance volumes hitting their highest point in nearly three years, retention rates fell in Q3 2019.

“After hitting an 18-year low in the fourth quarter of 2018, refinance lending has nearly doubled since then,” said Graboske. “The bulk of that increase was driven by people refinancing to improve the rate or term on their current mortgage, with five times the number of such rate/term refis as there were in Q4 2018. Cash-out refinances were up as well, although by a more modest 24% over the same period. Still, cash-outs made up 52% of all Q3 2019 refinances, with homeowners withdrawing more than $36 billion in equity, the highest amount withdrawn via cash-outs in nearly 12 years. Given that tappable equity continues to grow – $6.2 trillion as of Q3 2019 – and the continued headwinds facing the HELOC market, this is a segment lenders and servicers may likely focus on in coming months. Any upward movement in rates would likely only drive the cash-out share of lending higher.

“But for both cash-out and rate/term refinances, borrowers are leaving their servicers at significant rates despite this surge in activity. Just 22% of borrowers stayed with their servicer post-refinance in Q3 2019. The business of nearly three of every four rate/term refinance borrowers – historically an easier segment to retain – was lost, with servicers retaining just 26% of borrowers, down from 29% in Q2 2019. Cash-out borrower retention was even more dismal, though, as servicers lost more than four out of every five borrowers post-refinance. That’s the lowest retention rate among that segment in more than two years. While refinance activity is up across the board, the characteristics of refinancing borrowers – along with their motivation and ‘trigger points’ to refinance – are anything but uniform. Advanced portfolio and market analysis can help servicers better understand changing borrower dynamics and tune their strategies accordingly.”
emphasis added
BKFS Click on graph for larger image.

Here is a graph from the Mortgage Monitor that shows the National Delinquency Rate over time.

From Black Knight:
• While October delinquency rate declines are common, this year's nearly 4% drop was almost twice the 20-year average

• The national delinquency rate is now 1.15% below its pre-recession (2000-2005) average, the largest such delta on record

• As delinquencies tend to trend upward seasonally in both November and December, a rise in the coming months would not be unexpected
The second graph shows equity withdrawn via cash-out refinances and 2nd mortgages: BKFS
• In Q3 2019, refinance lending hit its highest level in nearly three years, fueled by an increase in rate/term refinances

• The bulk of that increase was driven by people refinancing to improve the rate or term on their current mortgage, with 5X the number of such rate/term refis as there were in Q4 2018

• Cash-out refinances were up as well, although by a more modest 24%, over the same period

• Still, cash-outs made up 52% of all Q3 2019 refinances, with homeowners withdrawing more than $36 billion in equity, the largest amount in nearly 12 years

• Any upward movement in rates would likely drive the cash-out share of lending higher
There is much more in the mortgage monitor.