Origination numbers remained weak through the end of 2013, and the odds of a resurgence in refinances boosting volumes don’t look great, either, according to Black Knight Financial Services (BKFS).
In its January Mortgage Monitor Report, the company reported originations totaled about 347,000 in December, a slight uptick from November but still less than half the volume recorded only months before.
The start of 2014 didn’t look much better.
“In 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,” said Herb Blecher, SVP of BKFS’ Data & Analytics division. “Overall originations were down almost 60 percent year-over-year, with HARP [Home Affordable Refinance Program] volumes down 70 percent over the same period.”
Those drops are largely related to the increased interest rate environment, which has left many borrowers little incentive to refinance. Over just the last two months, the company says the “refinancible” population has declined about 13 percent.
“Since that’s been such a huge driver of overall originations, we expect that to give us somewhat of a look ahead of where we’re going next month,” Blecher said.
At the same time, however, Blecher noted that a portion of the decline in refinances can also be chalked up to the fact that a majority of those who were able to refinance at low rates already have.
Meanwhile, home equity lending had a more positive year, seeing its first increase since 2006—though total home equity volumes remain down more than 90 percent compared to that time.
Most of that resurgence in home equity origination is concentrated in what the company calls “super-prime” borrowers, with average credit scores for first- and second-lien home equity lines of credit (HELOCs) clocking in as high as 786 and 779, respectively.
As a result, BKFS says loan performance on these newer vintages has been solid, with delinquency rates averaging 0.1 percent over the past four years.
The same can’t be said for those that have reached the amortizing stage, however. According to the company, new problem loan rates for pre-2004 HELOC vintages were up 27 percent year-over-year as of January, coming up to about 0.77 percent.