Black Knight Financial Servicesâ January Mortgage Monitor Report showed a general decline in the overall refinanciable population of both traditional and HARP-eligible borrowers with associated loan origination volumes dropping in both categories as well.
âIn January, we saw origination volume continue to decline to its lowest point since 2008, with prepayment speeds pointing to further drops in refinance-related originations,â said Herb Blecher, senior vice president of Black Knight Financial Servicesâ Data & Analytics division. âOverall originations were down almost 60 percent year over year, with HARP volumes (according to most recent FHFA report) down 70 percent over the same period. These declines are largely tied to the increased mortgage interest rate environment, which is having a significant impact on the number of borrowers with incentive to refinance. A high-level view of this refinanciable population shows a decline of about 13 percent just over the last two months.
âOf course, in addition to higher interest rates, a good deal of this decline can be attributed to the fact that a majority of those who could refinance at historically low rates in recent years already have, and we see a similar dynamic in terms of HARP-eligible loans. The volume of HARP refinances over the past year has driven this population down to about 700,000 loans in January 2014, as compared to over 2.3 million at the same time last year. From a geographic perspective, outside of Florida and Nevada, we see the Midwestern states of Illinois, Michigan, Missouri and Ohio have among the highest percentage of HARP eligibility.â
However, while loan origination volume has declined year over year, property sales activity remained relatively strong through year-end in 2013, with Decemberâs monthly sales up 3.7 percent year over year and full year 2013 up 8.4 percent versus 2012. Fourth-quarter sales were bolstered by a jump in the percentage of cash sales, to over 40 percent of the total, up from about 25 percent in the prior year.
The most recent data also marked 2013 as the first year in which home equity lending has increased since 2006. Home equity volumes, including both loans and lines of credit, were still down more than 90 percent from that time, however. Black Knight found that the current resurgence in home equity origination is concentrated in so-called âsuper-primeâ borrowers, with average credit scores for first- and second-lien home equity lines of credit (HELOCs) originated over the past four years have averaged at just 0.1 percent. At the same time, HELOCs originated prior to 2004 (and therefore in the amortizing stage of the loan) are seeing increased rates of new problem loans â up 27 percent year over year as of January.