Black Knight's Mortgage Monitor report [1] began with a review of some of the high-level mortgage performance statistics stated in the company’s most recent First Look report, accompanied by an update on delinquency, foreclosure, and prepayment trends. An in-depth look into the noticeable rise in prepayment activity, and the reasons for it, followed thereafter, and fast on the heels of those facts came an assessment of the refinance incentive remaining in the current market. The nation’s equity landscape was then discussed before the subject of servicer retention rates was broached.
The report wasted no time in getting down to the nitty-gritty, evaluating their procured stats in order to offer an overview of October’s activity. They reported an impressive and steady rise in mortgage prepayments, an occurrence that they attribute to previous low-interest rates. Although, they did also warn that a recent rise in rates, coupled with the trend of seasonal home sales slowing, may likewise retard prepayment activity as the coming holidays progress. In light of this, the report predicts that the trend for delinquencies to rise seasonally in both November and December would be no surprise.
Regarding prepayment activity and the current factors driving prepayments, Black Knight Mortgage Monitor’s data reveals that overall prepayment activity is now more than three times higher than in January 2019, a month which stats represented an 18-year low. The date then points to the fact that the lion’s share of 2019’s prepayment increase was driven by a rise in refinancing occurrences. Also, even though late October’s interest rates rose to 3.78%, sending the incentives to refinance to their lowest levels since March, Freddie Mac’s December 5 report on refinancing candidates in the housing market points to the promising fact that more than 8 million refinance candidates still remain at the ready to make moves.
Then offering insights into the current state of equities, Black Knight Mortgage Monitor shared that tappable equity has grown in 97 of the 100 largest U.S. markets during the past year, showcasing widely varying growth rates, of which, the most equity-rich markets seeing some of the lowest.
It was then revealed that while refinance lending is at multi-year highs, servicers struggled to retain refinancing borrowers in the third quarter of 2019. Specifically, after seeing the highest retention rates since late 2017 earlier in the year, just 22% of borrowers stayed with their servicer post-refinance. Pointing out that, “Data shows that borrowers' motivations for refinancing are anything but uniform,” Black Knight Mortgage Monitor’s then suggests that in order to better navigate and understand these ever-changing trends, an advanced portfolio and market analysis can help servicers proceed in the most successful fashion, forward.