Mortgage Monitor finds that Refinance Makes Up Half of Originations Market

Black Knight Financial Services recently released their April 2015 Mortgage Monitor finding that the refinance share of the mortgage origination market was over 50 percent in the first quarter of 2015, a first since the third quarter of 2013.

Black Knight reviewed refinance originations as a share of the total market in the report. They also examined the tightening of current credit score requirements when dealing with both refinance and purchase originations.

"The 30-year conforming mortgage interest rate is down approximately 70 basis points from where it was one year ago, providing borrowers who can qualify with additional incentive to refinance, and the data shows that they have been acting on that incentive," said Ben Graboske, SVP for Black Knight Financial Services' Data & Analytics division.

Data for the report was gathered by the Data and Analytics division of Black Knight Financial Services aggregates by analyzing and reporting upon the most recently available mortgage performance data from the company’s McDash loan-level database, the company said.

According to the report, the 30-year conforming mortgage interest rate dropped approximately 70 basis points from last year. This decrease has allowed qualifying borrowers a chance to refinance at a lower rate. There are also about 7 million potential refinance candidates, a large increase from 4.5 million last year. These borrowers would not only qualify but also benefit from refinancing.

“This is a very interest rate sensitive population, Black Knight said. “A 50 basis point increase in interest rates would result in a 43 percent reduction in refinance candidates, approximately 3 million borrowers.”

As more borrowers refinanced their homes, credit scores also rise, while loan-to-value ratios (LTVs) declined, the company reported. Credit scores on refinance originations have increased 19 points to a weighted average of 761, while LTVs have decreased to 65 percent over the past 18 months.

Borrowers with credit scores of 740 or above made up 68 percent of refinance originations in the first quarter, compared to 55 percent in the first quarter of last year, according to the report. Meanwhile, borrowers with credit scores between 680-739 declined to 23 percent of the first quarter of 2015, compared to 28 percent last year. Borrowers with credit scores below 640, have dropped by down to 3 percent this quarter from 6 percent the first quarter of 2014. Lending requirements are strict on purchase transactions, with a weighted average credit score of 751 and LTV of 81 percent, both only marginally higher than in the first quarter of last year.