Black Knight: Delinquency Rate Sees Occasional Spikes
The mortgage delinquency rate in July was about 4.51%, an increase of 4.78% compared with June but a decrease of 3.38% compared with July 2015, according to Black Knight Financial Services’ “First Look” report.
About 2.286 million mortgages were 30 days or more past due, but not in foreclosure, in July – an increase of about 108,000 compared with June but a decrease of about 70,000 compared with July 2015.
About 695,000 mortgages were 90 days or more past due but not in foreclosure – an increase of about 3,000 compared with June but a decrease of about 147,000 compared with a year earlier.
Based on its historical data, Black Knight is forecasting that the delinquency rate is likely to decrease in August.
There were about 61,300 foreclosure starts in July – a decrease of 11.54% compared with June and a decrease of 14.27% compared with one year earlier.
It was the second-lowest monthly total for foreclosure starts in 10 years, Black Knight says.
The presale foreclosure inventory rate in July was 1.09%, a decrease of 1.68% compared with June and a decrease of 28.36% compared with July 2015.
There were about 550,000 homes in the presale foreclosure inventory – a decrease of about 8,000 compared with June and a decrease of about 214,000 compared with July 2015.
It was the lowest presale foreclosure inventory rate since July 2007.
The monthly prepayment rate was about 1.26%. That’s down 11.98% compared with June and down 1.00% compared with July 2015.
Black Knight notes that prepayment activity fell in July despite overall growth in the number of refinance candidates and 30-year interest rates remaining at or below 3.45% for much of the month.
S&P-Experian: Default Rate Continues To Fall
The national default rate on first mortgages was about 0.66% in July – up one basis point compared with 0.65% in June but down 14 basis points compared with 0.80% in July 2015, according to the S&P/Experian Consumer Credit Default Indices.
The national default rate on second mortgages was about 0.44%, down four basis points from 0.48% in June and down 11 basis points from 0.55% in July 2015.
Meanwhile, the national default rate for credit cards was 2.92%, down from 3.11% in June but up from 2.79% in July 2015.
The national default rate for auto loans was 0.93%, up from 0.91% in June and up from 0.86% in July 2015.
“Consumer credit default rates remain close to 12-year lows amidst moderate growth in spending and incomes,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “The consumer economy is growing, with few significant difficulties in accessing credit. Personal incomes rose 2.7 percent in the last year, and retail sales, excluding autos, were up 2.3 percent in the year to July. Employment is increasing; median wage growth, as reported by the Atlanta Federal Reserve Bank, is 3.6 percent at annual rates; and consumer sentiment continues at high levels. Consumers’ use of debt has expanded, with both consumer credit and mortgage debt balances rising.
“This being an election year, and one when there will definitely be a new president next January, the economy faces more than the usual uncertainties,” Blitzer adds. “With the electoral outcome unknown and large differences between the candidates’ policy proposals, one should expect these uncertainties to cause some delays in business investments or consumer spending on big-ticket items. Delays in spending are likely to limit the growth in consumer and corporate debt, avoiding substantial increases in default rates in the near term.”
Second-Quarter Delinquency Rate Lowest In 10 Years
Delinquencies on mortgage loans (30 days or more past due but not in foreclosure) on one-to-four-unit residential properties were at a rate of about 4.66% as of the end of the second quarter – a decrease of 11 basis points compared with the first quarter and a decrease of 64 basis points compared with the second quarter of 2015, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
It was the lowest quarterly delinquency rate since the second quarter of 2006.
The percentage of loans on which foreclosure actions were started during the second quarter was 0.32%, a decrease of three basis points from the previous quarter and down eight basis points from one year earlier.
It was the lowest foreclosure starts rate since the second quarter of 2000.
The percentage of loans in the foreclosure process – also known as the foreclosure inventory – at the end of the second quarter was 1.64%, a decrease of 10 basis points from the previous quarter and a decrease of 45 basis points compared with the second quarter of 2015.
It was the lowest foreclosure inventory rate since the second quarter of 2007.
The serious delinquency rate (90 days or more past due or in the process of foreclosure) was 3.11%, a decrease of 18 basis points compared with the first quarter and a decrease of 84 basis points compared with one year earlier.
It was the lowest serious delinquency rate since the third quarter of 2007.
“Mortgage performance improved again in the second quarter primarily because of the combination of lower unemployment, strong job growth and a continued nationwide housing market recovery,” says Marina Walsh, vice president of industry analysis for the MBA, in a statement. “The mortgage delinquency rate tracks closely with the nation’s improving unemployment rate. In the second quarter of 2016, the mortgage delinquency rate was 4.66 percent, while the unemployment rate was 4.87 percent. By comparison, at its peak in the first quarter of 2010, the delinquency rate was 10.06 percent and the unemployment rate stood at 9.83 percent.
“In addition, the delinquency rate of 4.66 percent for the second quarter of 2016 was lower than the historical average of 5.36 percent for the time period 1979 to the present,” Walsh adds. “Among the various loan types, the delinquency rate improved for conventional loans, as well as Federal Housing Administration loans.”
Equifax: Default Rate Back To 2007 Levels
Although the write-off rate returned to historic lows, some areas remain elevated. For instance, at 12.9 basis points, the write-off rate in Puerto Rico was three times higher than the national average of 3.3 basis points. In Nevada, the rate of 6.6 basis points was twice as high as the national average.
“The backlog of foreclosures from the financial crisis finally appears to be waning, and write-offs are returning to historically normal levels,” says Amy Crews Cutts, senior vice president and chief economist at Equifax, in a release. “Rising home values have helped significantly, as have improving labor markets. Given the low inventory of homes for sale and the overall improving credit profile of the U.S. consumer, we expect home sales to maintain the upward trend we’ve seen in the first half of the year and for mortgage default performance to continue its downward path.”
As of the end of June, there were about 49.8 million mortgages outstanding – an increase of 0.7% compared with June 2015. The total balance outstanding of these first mortgages was about $8.33 trillion, a year-over-year increase of 2.8%.
The severe delinquency rate (90 days past due or in foreclosure) for home equity installment loans was 1.46%, down from 1.80% in June 2015. As of the end of June, the total outstanding balance on all home equity installment loans was about $131.4 billion, a year-over-year decrease of 2.7%. The total number of outstanding loans was about 4.5 million.
The severe delinquency rate for home equity lines of credit (HELOCs) was 1.28%, down from 1.45% in June 2015. The total number of outstanding HELOCs was about 10.9 million, a year-over-year decrease of 3.4%. The total balance outstanding for all HELOCs was about $486.5 billion, a decrease of 3.5%.
‘Refinanceable Population’ Swells To 8.7 Million Borrowers
The recent Brexit vote pushed down mortgage interest rates to new lows, resulting in an additional 1.2 million U.S. homeowners falling into the “refinanceable population” – homeowners who would benefit from refinancing their mortgages – according to Black Knight Financial Services’ Mortgage Monitor report for July.
That additional 1.2 million brought the total number of borrowers who would benefit from refinancing to about 8.7 million – the highest level in at least 10 years, Black Knight says.
However, rising home prices continue to offset the trend. As home prices rise, the amount of savings a homeowner realizes through refinancing is diminished. Should mortgage interest rates rise again – by as little as 1% – it could literally blow the doors off affordability, the firm says.
“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,” Graboske adds. “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.”
After the U.K. voted to leave the European Union on June 23, 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 multiyear lows in rates are having on the population of 30-year mortgage holders who could both likely qualify for and benefit from refinancing.
Graboske points out that if mortgage interest rates had not fallen 55 basis points during the first six months of this year, rising home prices would have resulted in a severe erosion of affordability.
“All else being equal, the monthly mortgage payment on the average-priced home should be approximately $63 less per month than it was at the end of 2015,” he says.