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Loans Originated Last Year Show Record Performance

Loans originated last year are the best-performing mortgage loans on record, according to the ""November Mortgage Monitor"":http://www.lpsvcs.com/LPSCorporateInformation/NewsRoom/Pages/20140114.aspx released Tuesday by Black Knight Financial Services (formerly Lender Processing Services).


The Monitor also found a significant increase in non-agency loans, a sign that the market might be ready for more risk.

""[H]eightened credit standards have resulted in this year being the best-performing vintage on record,"" said Herb Blecher, SVP of Black Knight Financial Services' data and analytics division.

""Even adjusting for some of these changes, such as credit scores and loan-to-values, we are seeing total delinquencies for 2013 loans at extremely low levels across every product category,"" Blecher said.

Loan performance has improved among all cohorts of loans--private market loans, GSE loans, Ginnie Mae loans, and portfolio loans.

However, stringent lending requirements may be biting into originations, which are now at their lowest levels since 2010, according to Black Knight.


Home equity lending is the one sector that has been increasing of late. In fact, home equity lending is up 70 percent from last year, with second lien home equity loans more than double their year-ago levels, according to the November report.

Blecher also pointed out that ""while overall volumes are down, we are seeing an increased proportion of the market being supported by non-agency (vs. government) lending--with the share nearly doubling as compared to 2010.""

Non-agency, first-lien, prime, jumbo loans have increased 75 percent over the year in November, according to Black Knight.

""Notably, nearly all of these jumbo loans have been originated with no mortgage insurance, which may indicate an increased appetite for risk, as well as an opportunity to expand credit criteria, for originations within the private market,"" Blecher said.

Just 0.5 percent of non-agency jumbo loans were originated with private mortgage insurance in 2013, compared to 13.2 percent in the 2007 and 2008.

Other notable trends Black Knight reported include a declining number of ""refinancible"" loans and a possible wave of delinquencies on the horizon among amortizing HELOCs.

The number of ""refinancible"" loans has declined by about 4 million to 5.9 million from the end of 2012 through November 2013, according to Black Knight.

Basic criteria for a refinance includes a credit score of 720, and a loan-to-value ratio of 80 percent or less. Lowering the credit requirement to a 700 could allow an additional 1 million loans to become refinancible, according to Black Knight.

The national delinquency rate improved 2.63 percent over the month to a rate of 6.45 percent, according to the monthly report.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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