MORTGAGE MONITOR - Black Knight, Inc. · From there, we move on to the nation’s equity landscape,...

OCTOBER 2019 REPORT

MORTGAGE MONITOR

https://www.blackknightinc.com/data-reports/?report-type=mortgage-monitor&report-year=2018

https://www.blackknightinc.com/

Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, and/or an affiliate. © 2019 Black Knight Financial Technology Solutions, LLC. All Rights Reserved.

MORTGAGE MONITOR

OCTOBER 2019 | 2Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, and/or an affiliate. © 2019 Black Knight Financial Technology Solutions, LLC. All Rights Reserved.

Each month, the Black Knight Mortgage Monitor looks at a variety of issues related to the mortgage finance and housing industries.

This month, as always, we begin with a review of some of the high-level mortgage performance statistics reported in our most recent First Look report, with an update on delinquency, foreclosure and prepayment trends. Next, we provide a detailed breakdown of the recent – and significant – rise in prepayment activity by factors driving prepayment. In addition, we provide the most recent assessment of refinance incentive remaining in the market.

From there, we move on to the nation’s equity landscape, with a specific focus on tappable equity – the amount available to homeowners with mortgages before reaching a maximum combined loan-to-value (CLTV) ratio of 80%. We examine tappable equity growth rates, geographic breakdowns and distributions of equity by borrowers’ first lien interest rate positions. Finally, we take an updated look at servicer retention rates. Despite refinance lending hitting a three-year high, servicers struggled to retain the business of refinancing borrowers in Q3 2019. We therefore break down refinance activity and subsequent retention rates for insight into what factors may be influencing this trend.

In producing the Mortgage Monitor, Black Knight’s Data & Analytics division aggregates, analyzes and reports upon the most recently available data from the company’s vast mortgage and housing related data assets. Information is gathered from the McDash loan-level mortgage performance dataset, the Black Knight HPI and the company’s robust public property records database covering 99.9% of the U.S. population. For more information on gaining access to Black Knight’s data assets, please call 844-474-2537 or email [email protected].

OCTOBER 2019 OVERVIEW

MORTGAGE MONITOR

OCTOBER FIRST LOOK RELEASE

PREPAYMENT ACTIVITY

Q3 2019 EQUITY UPDATE

SERVICER RETENTION RATES

APPENDIX

DISCLOSURES

DEFINITIONS

3

4

8

13

17

20

21

CONTENTS




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MORTGAGE MONITOR

OCTOBER 2019 | 3

Here we have an overview of findings from Black Knight’s ‘First Look’ at October mortgage performance data. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

OCTOBER 2019 FIRST LOOK RELEASE

Spurred by low interest rates, mortgage prepayments continued to rise – however, recent upticks in rates, together with the typical seasonal slowing in home sales, may slow down prepay activity over the coming months

OCTOBER OVERVIEW STATS

CHANGE IN DELINQUENCY RATE

At 3.39%, the national delinquency rate is within 0.03% of the record low

set in May 2019

October’s delinquency rate was down 7% from this time last year

FORECLOSURE RATE

The number of loans in active foreclosure edged up slightly in October

While up 3K for the month, total active foreclosure inventory is down 12K year-

over-year

PREPAYMENT RATE

October’s prepayment rate hit the highest level since May 2013

Prepayments have more than doubled (+134%) from this time last year

16.4%1.0%-3.8%



https://www.blackknightinc.com/black-knights-first-look-at-October-2019-mortgage-data/


http://www.blackknightinc.com/wp-content/uploads/2019/12/BKI_MM_Oct2019_Chart01.pdf




MORTGAGE MONITOR

OCTOBER 2019 | 4

» While October delinquency rate declines are common, this year's nearly 4% drop was almost twice the 20-year average

» The national delinquency rate is now 1.15% below its pre-recession (2000-2005) average, the largest such delta on record

» As delinquencies tend to trend upward seasonally in both November and December, a rise in the coming months would not be unexpected

-2.7% -2.2%

-10.6%

+3.2%

+0.7%

+2.9%

+0.6%

-0.2%

+5.1%

-2.1%

+4.4%

+1.9%

-14%

-9%

-4%

1%

6%

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Aug

ust

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

AVERAGE MONTHLY CHANGE IN DELINQUENCY RATE(SINCE JANUARY 2000)

3.39%

4.54%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

2000

-10

2001

-10

2002

-10

2003

-10

2004

-10

2005

-10

2006

-10

2007

-10

2008

-10

2009

-10

2010

-10

2011

-10

2012

-10

2013

-10

2014

-10

2015

-10

2016

-10

2017

-10

2018

-10

2019

-10

NATIONAL DELINQUENCY RATE – FIRST LIEN MORTGAGESDelinquency Rate 2000-2005 Average Record Low

NATIONAL DELINQUENCY RATE – FIRST LIEN MORTGAGES AVERAGE MONTHLY CHANGE IN DELINQUENCY RATE(SINCE JANUARY 2000)

OCTOBER 2019 FIRST LOOK RELEASE






MORTGAGE MONITOR

OCTOBER 2019 | 5

» Each of the past 15 vintages saw double-digit percentage increases in single-month mortality (SMM) rates from September to October

» Some of the largest increases were seen among bubble vintage loans (2005-2007)

» 2018 vintage loans accounted for 28% of dollars prepaid in October, while making up just 13% of active loan balances

» Though GNMA loans continue to prepay at the fastest rate, they saw the smallest monthly increase (+8%)

» Legacy loans in private label securities (PLS) saw the largest increase at +32%, while portfolio loans were up 22%

» Prepay speeds are now very similar between GNMA, GSE and portfolio loans, with SMM among PLS loans coming in about 30BPS lower

» Due to increased prepayment activity and a resurgent refi market, YTD 2019 vintage loans now make up 17% of the total active mortgage market

1.49

%

1.31

%

1.30

%

1.31

%

1.52

%

1.53

%

1.52

%

1.38

%

1.38

% 1.95

%

1.62

%

1.35

% 1.93

%

3.82

%

+0%

+50%

+100%

+150%

+200%

+250%

+300%

+350%

+400%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Vintage

PREPAYMENT SPEEDS (SMM) BY VINTAGESeptember 2019 October 2019 6-Month Percent Change (Right Axis)

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2007

-10

2008

-10

2009

-10

2010

-10

2011

-10

2012

-10

2013

-10

2014

-10

2015

-10

2016

-10

2017

-10

2018

-10

2019

-10

PREPAYMENT RATE (SMM) BY INVESTOR / PRODUCTGSE FHA/VA Portfolio Private Securities Total Market

PREPAYMENT RATE (SMM) BY INVESTOR / PRODUCT PREPAYMENT SPEEDS (SMM) BY VINTAGE

Here, we provide a detailed breakdown of the recent rise in prepayment activity along with factors driving prepayments. In addition, we provide the most recent assessment of refinance incentive remaining in the market. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

OCTOBER 2019 PREPAYMENT ACTIVITY







MORTGAGE MONITOR

OCTOBER 2019 | 6

» The bulk of 2019’s prepayment increase has been driven by a rise in refinance activity

» Growth in rate/term refinance lending makes up 62% of the increase (+76BPS), and cash-out lending another 21% (+25BPS)

» Fluctuations in home sale-related prepayments account for the remainder

» A 5BPS increase in housing turnover-related prepays from September to October suggests that falling rates and improved affordability may have spurred a measurable increase in buy/sell transactions

» October’s prepayments also suggest another noticeable increase in refinance originations from September

» Prepayments due to rate/term refinances are up more than 10X YTD; among cash-out refis they’re up a more modest 2.5X

Overall prepayment activity is now more than 3X higher (+122BPS) than January 2019's 18-year low

61 58 48 29 20 18 14 17 17 17 21 18 25 21 18 16 12 11 9 9 7 7 8 6 7 5 6 9 15 17 24

35 30 51 58

72 84

39 39 37

28 23 24 21 24 24 23

28 25 30

28 26 24 21 23 21 21 19 19 20 17 19 15 16 15 16 19

22 25 23

29 32

34

41 37 34

36

26 25

39 39

51 56 49 51

40 41

36 35 26

26 38 42 50 55 51 50

36 39 34 32 23

24 35

41

50 49

51 47

38

43 7

6 8

7

7

9 7

8 8 7

7

8 10

8 9

8 8

10 8 8 9 8 11

8 9

8 8 8

8

9

9

10 8

9 9 8

10

6 6

6

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6

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5 5 5 6 4 5

4 4

3 4 3

3

4

4

3 3

3 3 3

3

-

20

40

60

80

100

120

140

160

180

20161

0

20161

1

20161

2

20170

1

20170

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20170

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20170

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20170

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20170

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20180

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0

Prep

aym

ent R

ate

(SM

M) i

n B

PS

PREPAY ACTIVITY (SMM) BY PREPAYMENT DRIVER(36-MONTH DETAILED BREAKDOWN)

Rate/Term Refi Cash-out Refi Sale of Home Curtailment Default


PREPAY ACTIVITY (SMM) BY PREPAYMENT DRIVER(36-MONTH DETAILED BREAKDOWN)





MORTGAGE MONITOR

OCTOBER 2019 | 7

» Interest rates climbing to 3.78% in late October drove refinance incentive to its lowest level in five months

» With Freddie Mac reporting 30-year rates at 3.68% as of December 5th, 8.15M refinance candidates remain in the market

» While down 15% from September’s weekly average of 9.5M, it’s still >4.5X the population from one year ago

» The market remains sensitive to even small movements in interest rates

» Just 1/8th of a percent decline in 30-year rates would result in 1.5M (+19%) homeowners regaining incentive to refinance

» Conversely, an 1/8th of a point increase would cut the population by 17%

19.6

M

17.4

M

14.9

M

13.2

M

11.5

M

9.6M

8.1M

6.7M

5.7M

4.7M

3.7M

3.2M

2.8M

2.4M

2.0M

1.7M

1.6M

1.4M

1.1M

1.0M

.9M

3.00

0%

3.12

5%

3.25

0%

3.37

5%

3.50

0%

3.62

5%

3.75

0%

3.87

5%

4.00

0%

4.12

5%

4.25

0%

4.37

5%

4.50

0%

4.62

5%

4.75

0%

4.87

5%

5.00

0%

5.12

5%

5.25

0%

5.37

5%

5.50

0%

NUMBER OF REFINANCE CANDIDATES UNDER DIFFERENT 30-YEAR FIXED RATE SCENARIOS

(BASED ON FIRST LIEN MARKET MAKE-UP AS OF OCTOBER 2019)

.0M

2.0M

4.0M

6.0M

8.0M

10.0M

12.0M

14.0M

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

11.Oct 15.Nov 20.Dec 24.Jan 28.Feb 04.Apr 09.May 13.Jun 18.Jul 22.Aug 26.Sep 31.Oct 05.Dec

REFINANCE CANDIDATES BY WEEK VS. 30-YR FIXED RATESRefi Candidates (Right Axis) 30-YR Fixed Rate Freddie PMMS (Left Axis)

REFINANCE CANDIDATES BY WEEK VS. 30-YR FIXED RATES


NUMBER OF REFINANCE CANDIDATES UNDER DIFFERENT 30-YEAR FIXED RATE SCENARIOS

(BASED ON FIRST LIEN MARKET MAKE-UP AS OF OCTOBER 2019)






MORTGAGE MONITOR

OCTOBER 2019 | 8

Here, we look at tappable equity growth rates, geographic breakdowns, and distributions of equity by borrowers’ first lien interest rate positions. This information has been compiled from Black Knight’s Home Price Index, as well as the company’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

OCTOBER 2019 Q3 EQUITY UPDATE

» Tappable equity – the amount available to homeowners with mortgages before reaching a maximum combined loan-to-value (CLTV) ratio of 80% – edged down seasonally in Q3

» However, its annual growth rate continues to rise, likely due to falling interest rates easing what had been a slowing housing market

» Total tappable equity stands at $6.2T as of the end of Q3 2019, the largest Q3 volume on record

» While down 1% from Q2, it's up 5.0% from the same time last year, the strongest growth rate since late 2018

» The average homeowner holds $119K in tappable equity that could be withdrawn while still retaining a conservative buffer of 20% equity, up $3,450 from the same time last year

» Total market CLTV rose slightly to 52%, up marginally from Q2 but level from the same time last year

+16.5%

+5.0%

+0.0%

+5.0%

+10.0%

+15.0%

+20.0%

+25.0%

2016-09

2016-12

2017-03

2017-06

2017-09

2017-12

2018-03

2018-06

2018-09

2018-12

2019-03

2019-06

2019-09

ANNUAL GROWTH RATE OF TAPPABLE EQUITY

$4,285

$4,914

$4,627

$3,755

$2,830

$2,603

$2,370

$2,234

$2,557

$3,123

$3,557

$4,122

$4,690

$5,425

$5,806

$6,061

$5,943

$5,714

$5,982

$6,317

$6,238

$

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2004-12

2005-12

2006-12

2007-12

2008-12

2009-12

2010-12

2011-12

2012-12

2013-12

2014-12

2015-12

2016-12

2017-12

2018-03

2018-06

2018-09

2018-12

2019-03

2019-06

2019-09

Tapp

able

Equ

ity in

$Bi

llion

s

TAPPABLE EQUITY OF U.S. MORTGAGE HOLDERS

Tappable Equity: Equity available on all residential properties with an existing mortgage before reaching a current CLTV of 80%

TAPPABLE EQUITY OF U.S. MORTGAGE HOLDERS ANNUAL GROWTH RATE OF TAPPABLE EQUITY








MORTGAGE MONITOR

OCTOBER 2019 | 9


$542B

$41 9B

$1 93B

$1 87B

$1 26B

$81 0B

$278B

$96B

$1 1 6B

$1 30B

$1 99B$1 41 B

$1 09B

TAPPABLE EQUITY BY CBSA – Q3 2019GREEN MARKETS HAVE SEEN THEIR TOTAL TAPPABLE

EQUITY DECLINE OVER THE PAST 12 MONTHS

TAPPABLE EQUITY BY CBSA – Q3 2019GREEN MARKETS HAVE SEEN THEIR TOTAL

TAPPABLE EQUITY DECLINE OVER THE PAST 12 MONTHS

» That said, growth rates have varied recently, with the most equity-rich markets seeing some of the lowest growth rates

» The 10 most equity-rich markets hold nearly half ($3T) of the country’s tappable equity, but stronger growth rates among mid-tier markets have begun to edge the pendulum in 2019

Tappable equity has grown in 97 of the 100 largest U.S. markets over the past 12 months





MORTGAGE MONITOR

OCTOBER 2019 | 10


» Nine of the 10 most equity-rich markets were in the bottom third in terms of growth rates

» In fact, four (Chicago, Seattle, San Francisco and San Jose) were among the bottom 10

» Tappable equity declined on a year-over-year basis in just three of the 100 largest U.S. markets - San Jose, CA (-7%); Bridgeport, CT (-3%); and Honolulu, HI (-1%)

» St Louis, MO; Boise City, ID; and Memphis, TN were among the markets seeing the largest Y/Y increases

$144B

$165B

$187B

$201B

$215B

$259B

$282B

$340B

$342B

$2,261B

$B $500B $1,000B $1,500B $2,000B $2,500B

Virginia

Massachusetts

New Jersey

Illinois

Colorado

Washington

New York

Florida

Texas

California

TAPPABLE EQUITY COMPARISON BY STATE(TOP 10 STATES BY TAPPABLE EQUITY VOLUME)

2019-Q3 2018-Q3


$130B

$141B

$173B

$187B

$193B

$199B

$278B

$419B

$542B

$810B

$B $200B $400B $600B $800B

Dallas, TX

Boston, MA

San Diego, CA

Seattle, WA

Washington, DC

Chicago, IL

San Jose, CA

New York-Newark, NY-NJ

San Francisco, CA

Los Angeles, CA

TAPPABLE EQUITY COMPARISON BY CBSA(TOP 10 CBSAS BY TAPPABLE EQUITY VOLUME)

2019-Q3 2018-Q3

TAPPABLE EQUITY COMPARISON BY CBSA(TOP 10 CBSAS BY TAPPABLE EQUITY VOLUME)

TAPPABLE EQUITY COMPARISON BY STATE(TOP 10 STATES BY TAPPABLE EQUITY VOLUME)







MORTGAGE MONITOR

OCTOBER 2019 | 11

» Despite record levels of tappable equity, HELOC originations have fallen Y/Y in each of the past nine quarters

» Exploring the first lien interest rates of tappable equity holders, along with a comparison of HELOC vs. 30-year fixed interest rate offerings, provides an understanding of why the HELOC market is behaving the way it is

» 65% of borrowers with tappable equity have current interest rates at or above the going rate in the market as of mid-November (3.75%)

» Those borrowers can withdraw equity via a cash-out refinance at a similar or even better rate than what they have today

» At the same time, HELOC rate offerings in Q3 2019 were on average 2.9% higher than 30-year fixed rates, the largest such delta following the financial crisis

» Even if the full 0.5% of recent Federal Reserve rate cuts translates directly to reductions in HELOC interest rates, the delta between 30-year and HELOC rates remains significant

» This may well continue to push borrowers towards cash-out refinance products as a way to tap available equity


6.58%

3.67%

2.91%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2012

-1

2012

-2

2012

-3

2012

-4

2013

-1

2013

-2

2013

-3

2013

-4

2014

-1

2014

-2

2014

-3

2014

-4

2015

-1

2015

-2

2015

-3

2015

-4

2016

-1

2016

-2

2016

-3

2016

-4

2017

-1

2017

-2

2017

-3

2017

-4

2018

-1

2018

-2

2018

-3

2018

-4

2019

-1

2019

-2

2019

-3

Origination Quarter

AVERAGE INTEREST RATE AT ORIGINATION2nd Lien HELOC 30-YR Fixed Rate (FHLMC) Delta Between 30-Year and HELOC

Source: Freddie Mac PMMS; McDash Home Equity Database

$0B

$200B

$400B

$600B

$800B

$1,000B

$1,200B

Below 3%

3.00-3.24%

3.25-3.49%

3.50-3.74%

3.75-3.99%

4.00-4.24%

4.25-4.49%

4.50-4.74%

4.75-4.99%

5.00-5.24%

5.25-5.49%

5.50-5.74%

5.75-5.99%

6.00-6.24%

6.25-6.49%

6.50-6.74%

6.75-6.99%

7%andAbo

ve

DISTRIBUTION OF TAPPABLE EQUITY(BY FIRST LIEN INTEREST RATE)

65% of Tappable Equity Holders have current interest rates of 3.75% or higher

DISTRIBUTION OF TAPPABLE EQUITY(BY FIRST LIEN INTEREST RATE)

AVERAGE INTEREST RATE AT ORIGINATION

Source: Freddie Mac PMMS; McDash Home Equity Database

65% of Tappable Equity Holders have current interest rates of 3.75% or higher






MORTGAGE MONITOR

OCTOBER 2019 | 12

» In Q3 2019, refinance lending hit its highest level in nearly three years, fueled by an increase in rate/term refinances

» After hitting an 18-year low in the fourth quarter of 2018, refinance lending has nearly doubled (+94%) since then

» The bulk of that increase was driven by people refinancing to improve the rate or term on their current mortgage, with 5X the number of such rate/term refis as there were in Q4 2018

» Cash-out refinances were up as well, although by a more modest 24%, over the same period

» Still, cash-outs made up 52% of all Q3 2019 refinances, with homeowners withdrawing more than $36 billion in equity, the largest amount in nearly 12 years

» Any upward movement in rates would likely drive the cash-out share of lending higher


$B

$20B

$40B

$60B

$80B

$100B

$120B

2005

-Q1

2005

-Q3

2006

-Q1

2006

-Q3

2007

-Q1

2007

-Q3

2008

-Q1

2008

-Q3

2009

-Q1

2009

-Q3

2010

-Q1

2010

-Q3

2011

-Q1

2011

-Q3

2012

-Q1

2012

-Q3

2013

-Q1

2013

-Q3

2014

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2014

-Q3

2015

-Q1

2015

-Q3

2016

-Q1

2016

-Q3

2017

-Q1

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-Q3

2018

-Q1

2018

-Q3

2019

-Q1

2019

-Q3

Firs

t Lie

n Re

finan

ce O

rigin

atio

ns in

Mill

ions

EQUITY WITHDRAWN VIA CASH-OUT REFINANCE(INCLUDES 2ND MORTGAGE AND HELOC CONSOLIDATION)

82%

52%

0%

20%

40%

60%

80%

100%

0.0

0.5

1.0

1.5

2.0

2005

-Q1

2005

-Q2

2005

-Q3

2005

-Q4

2006

-Q1

2006

-Q2

2006

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2006

-Q4

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2010

-Q1

2010

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2011

-Q1

2011

-Q2

2011

-Q3

2011

-Q4

2012

-Q1

2012

-Q2

2012

-Q3

2012

-Q4

2013

-Q1

2013

-Q2

2013

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2013

-Q4

2014

-Q1

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2015

-Q1

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2015

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2016

-Q1

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-Q1

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-Q4

2018

-Q1

2018

-Q2

2018

-Q3

2018

-Q4

2019

-Q1

2019

-Q2

2019

-Q3

Cash

-out

Sha

re o

f Firs

t Lie

n Re

fis (B

y Co

unt)

Firs

t Lie

n Re

finan

ce O

rigin

atio

ns in

Mill

ions

FIRST LIEN REFINANCE ACTIVITYCash-out Refi Originations (Left Axis) Rate/Term Refi Originations Cash-out Share of First Lien Refis (Right Axis)

FIRST LIEN REFINANCE ACTIVITY EQUITY WITHDRAWN VIA CASH-OUT REFINANCE(INCLUDES 2ND MORTGAGE AND HELOC CONSOLIDATION)






MORTGAGE MONITOR

OCTOBER 2019 | 13

While refinance lending is at multi-year highs, servicers struggled to retain refinancing borrowers in Q3 2019. Here, we break down refinance activity and subsequent retention rates for insight into what factors may be influencing this trend. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

OCTOBER 2019 SERVICER RETENTION

» The business of nearly three of every four rate/term refinance borrowers – historically an easier segment to retain – was lost, with servicers retaining just 26% of borrowers, down from 29% in Q2 2019

» Cash-out borrower retention was even more dismal; servicers lost more than four out of every five (81%) borrowers post-refinance

19%

26%22%

0%

10%

20%

30%

40%

50%

60%

70%

2005

-Q3

2005

-Q4

2006

-Q1

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-Q2

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-Q3

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-Q4

2007

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2007

-Q2

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2011

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2011

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2012

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2017

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2017

-Q2

2017

-Q3

2017

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2018

-Q1

2018

-Q2

2018

-Q3

2018

-Q4

2019

-Q1

2019

-Q2

2019

-Q3

SERVICER RETENTION RATE OF REFINANCE TRANSACTIONSCash-out Refinances Rate/Term Refinances All Refinances After seeing the highest retention rates

since late 2017 earlier in the year, just 22% of borrowers stayed with their servicer post-refinance in Q3 2019

SERVICER RETENTION RATE OF REFINANCE TRANSACTIONS






MORTGAGE MONITOR

OCTOBER 2019 | 14

» As 2019 has progressed, the 2018 vintage has made up an increasing share of refinance originations

» In Q1 and Q2 2019, borrowers refinancing out of 2018 vintage loans made up roughly 1/5th of refinance originations

» As of Q3, they accounted for nearly one third of all refinance loans

» However, servicer retention rates among the 2018 vintage have declined from 35% in Q1/Q2 to just 30% in Q3, the sharpest pullback of any vintage

» Retention rates among 2018 vintage loans still remain the highest of any vintage, but the gap has certainly narrowed

0

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Vintage of Mortgage Being Refinanced

RETENTION RATES BY PRIOR LOAN VINTAGE(REFINANCE ORIGINATIONS IN Q3 2019)

Distribution of Refinance Originations Retention Rate

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RETENTION RATES BY PRIOR LOAN VINTAGE(REFINANCE ORIGINATIONS IN Q1 & Q2 2019)

Distribution of Refinance Originations Retention Rate


RETENTION RATES BY PRIOR LOAN VINTAGE(REFINANCE ORIGINATIONS IN Q1 & Q2 2019)

RETENTION RATES BY PRIOR LOAN VINTAGE(REFINANCE ORIGINATIONS IN Q3 2019)






MORTGAGE MONITOR

OCTOBER 2019 | 15


» Borrowers refinancing out of newer-vintages (2017, 2018 or 2019) tend to carry much higher balances and are primarily refinancing for interest rate reduction

» On average, 2018 vintage borrowers had pre-refinance balances of $380K; those refinancing out of early-2019 vintage loans had balances of $560k

» Just 18% and 21% withdrew equity respectively as compared to 52% in the market as a whole

» Homeowners refinancing out of 2008-2011 vintage loans carried much smaller average balances ($160K-$172K), but were much more equity-focused

» More than 80% of refinances stemming from those vintages involved the borrower withdrawing equity from their home

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Vintage of Loan Being Refinanced

CHARACTERISTICS OF LOANS REFINANCED IN Q3 2019Cash-out Share (Right Axis) Average Loan Balance Pre-Refi (Left Axis) Data shows that borrowers' motivations

for refinancing are anything but uniform

CHARACTERISTICS OF LOANS REFINANCED IN Q3 2019





MORTGAGE MONITOR

OCTOBER 2019 | 16


» 2018 and early-2019 vintage borrowers are seeing average interest rate savings of 0.9% and 0.7% respectively

» On the other hand, 2012, 2013, and 2016 vintage borrowers (when rates were lower) are in many cases actually raising their interest rates in order to tap equity

» On average these borrowers are raising their monthly mortgage payment by $200/month by refinancing

» Many borrowers in these vintages are choosing to raise their first lien balance rather than tap their equity via a HELOC at a higher rate

» A retention strategy that targets borrowers with high balances and significant interest rate incentive to refinance – while perhaps effective for 2018 and 2019 vintage borrowers – would be widely ineffective in reaching 2009 – 2017 vintage borrowers

» These borrowers tend to carry lower balances and tapping equity is the primary motivation behind refinancing

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/mo)

Vintage of Loan Being Refinanced

CHARACTERISTICS OF LOANS REFINANCED IN Q3 2019Avg Pmt Change ($/mo) Avg Rate Pre-Refi (Left Axis) Avg Rate Change (Left Axis) Advanced portfolio and market analysis

can help servicers better understand these changing borrower dynamics and tune their strategies accordingly

CHARACTERISTICS OF LOANS REFINANCED IN Q3 2019





MORTGAGE MONITOR

OCTOBER 2019 | 17

Oct-19 Monthly Change

YTD Change

Yearly Change

Delinquencies 3.39% -3.82% -9.54% -6.92%

Foreclosure 0.48% 1.05% -5.02% -6.21%

Foreclosure Starts 43,900 11.42% -12.55% -13.24%

Seriously Delinquent (90+) or in Foreclosure 1.31% -1.16% -11.76% -11.82%

New Originations (data as of Sep-19) 707K -11.8% 55.8% 41.0%

Oct-19 Sep-19 Aug-19 Jul-19 Jun-19 May-19 Apr-19 Mar-19 Feb-19 Jan-19 Dec-18 Nov-18 Oct-18

Delinquencies 3.39% 3.53% 3.45% 3.46% 3.73% 3.36% 3.47% 3.65% 3.89% 3.75% 3.88% 3.71% 3.64%

Foreclosure 0.48% 0.48% 0.48% 0.49% 0.50% 0.49% 0.50% 0.51% 0.51% 0.51% 0.52% 0.52% 0.52%

Foreclosure Starts 43,900 39,400 36,200 39,200 40,100 39,000 41,400 39,700 40,400 50,200 46,300 45,200 50,600

Seriously Delinquent (90+) or in Foreclosure 1.31% 1.32% 1.33% 1.34% 1.37% 1.37% 1.40% 1.45% 1.47% 1.48% 1.51% 1.50% 1.48%

New Originations 707K 801K 753K 675K 690K 603K 524K 423K 388K 453K 484K 546K

3.64

%

3.71

%

3.88

%

3.75

%

3.89

%

3.65

%

3.47

%

3.36

%

3.73

%

3.46

%

3.45

%

3.53

%

3.39

%

Oct-18

Nov-18

Dec-18

Jan-1

9

Feb-19

Mar-19

Apr-19

May-19

Jun-1

9Ju

l-19

Aug-19

Sep-19

Oct-19

TOTAL DELINQUENCIES

546K

484K

453K

388K

423K 52

4K 603K 69

0K

675K 75

3K

801K

707K

Oct-18

Nov-18

Dec-18

Jan-1

9

Feb-19

Mar-19

Apr-19

May-19

Jun-1

9Ju

l-19

Aug-19

Sep-19

NEW ORIGINATIONS

OCTOBER 2019 DATA SUMMARY

OCTOBER 2019 APPENDIX





MORTGAGE MONITOR

OCTOBER 2019 | 18

Month TOTAL ACTIVE COUNT 30 DAYS 60 DAYS 90+ DAYS FC Total NC FC Starts Average Days

Delinquent for 90+Average Days

Delinquent for FCRatio of 90+

to FC

1/31/05 47,706,128 1,197,062 339,920 458,719 276,745 2,272,446 50,922 242 324 165.8%1/31/06 50,900,620 1,242,434 387,907 542,378 258,613 2,431,332 76,477 207 308 209.7%1/31/07 53,900,458 1,425,030 468,441 551,439 393,973 2,838,883 117,419 203 267 140.0%1/31/08 55,478,782 1,743,420 676,266 950,639 813,560 4,183,885 195,033 190 256 116.8%1/31/09 55,788,441 2,001,314 932,436 1,878,981 1,321,029 6,133,760 250,621 193 323 142.2%1/31/10 55,098,009 1,945,589 903,778 2,972,983 2,068,572 7,890,922 292,308 253 418 143.7%1/31/11 53,861,778 1,750,601 746,634 2,078,130 2,245,250 6,820,615 277,374 333 527 92.6%1/31/12 52,687,781 1,592,463 652,524 1,796,698 2,205,818 6,247,503 223,394 395 666 81.5%1/31/13 51,229,692 1,464,583 587,661 1,551,415 1,742,689 5,346,348 156,654 460 803 89.0%1/31/14 50,380,779 1,341,074 529,524 1,278,955 1,213,046 4,362,599 97,467 486 935 105.4%1/31/15 50,412,744 1,238,453 465,849 1,060,002 884,901 3,649,204 93,280 509 1,031 119.8%1/31/16 50,754,010 1,300,564 444,962 832,265 660,056 3,237,847 72,021 494 1,047 126.1%1/31/17 51,159,681 1,110,977 390,341 665,258 481,613 2,648,190 70,568 454 1,012 138.1%1/31/18 51,428,922 1,085,065 413,313 708,248 337,351 2,543,976 62,470 364 931 209.9%1/31/19 51,896,438 1,074,044 367,750 503,655 264,875 2,210,325 50,196 391 830 190.1%2/28/19 51,952,453 1,154,445 362,974 501,897 264,225 2,283,541 40,353 385 838 190.0%3/31/19 52,081,244 1,061,924 348,443 492,889 264,451 2,167,707 39,657 391 853 186.4%4/30/19 52,228,211 1,003,514 335,160 473,565 259,290 2,071,529 41,356 393 880 182.6%5/31/19 52,304,596 965,815 332,992 461,036 255,386 2,015,229 38,970 394 897 180.5%6/30/19 52,288,778 1,145,626 349,170 454,890 259,274 2,208,960 40,126 364 920 175.4%7/31/19 52,260,606 1,020,037 343,343 443,500 257,859 2,064,739 39,189 369 908 172.0%8/31/19 52,519,269 1,025,863 343,145 444,029 252,873 2,065,911 36,179 364 913 175.6%9/30/19 52,574,229 1,058,103 352,565 442,868 252,215 2,105,751 39,433 348 892 175.6%10/31/19 52,657,467 1,007,146 345,630 432,863 255,268 2,040,907 43,933 351 871 169.6%

LOAN COUNTS AND AVERAGE DAYS DELINQUENT






MORTGAGE MONITOR

OCTOBER 2019 | 19

State Del % FC % NC % Year/Year Change in NC% State Del % FC % NC % Year/Year

Change in NC% State Del % FC % NC % Year/Year Change in NC%

National 3.4% 0.5% 3.9% National 3.4% 0.5% 3.9% -6.8% National 3.4% 0.5% 3.9% -6.8%MS 9.4% 0.8% 10.2% 1.8% OH* 4.0% 0.7% 4.6% -5.9% NH 3.2% 0.3% 3.4% -5.6%LA* 6.9% 0.8% 7.7% -2.1% TN 4.3% 0.2% 4.5% -7.6% VA 3.2% 0.2% 3.4% -4.9%AL 6.3% 0.4% 6.7% -1.2% VT* 3.3% 1.1% 4.4% -3.4% NV 2.5% 0.5% 3.0% -8.1%WV 5.8% 0.6% 6.3% 1.3% KS* 3.9% 0.5% 4.4% -5.1% WY 2.7% 0.3% 3.0% -7.4%AR 5.6% 0.5% 6.1% 1.2% NJ* 3.6% 0.7% 4.3% -11.8% AZ 2.6% 0.2% 2.8% -1.1%IN* 4.9% 0.7% 5.7% -3.2% NC 3.9% 0.4% 4.3% -14.0% SD* 2.3% 0.5% 2.8% 8.5%OK* 4.7% 0.9% 5.6% -0.8% IL* 3.5% 0.7% 4.2% -2.1% AK 2.4% 0.3% 2.7% -3.1%PA* 4.5% 0.7% 5.2% -4.1% NM* 3.4% 0.8% 4.1% -8.8% MN 2.3% 0.2% 2.5% 2.0%RI 4.4% 0.7% 5.2% -6.8% MO 3.8% 0.3% 4.1% -2.2% DC 2.0% 0.5% 2.5% -16.9%ME* 3.6% 1.5% 5.1% -8.9% FL* 3.3% 0.8% 4.1% -13.2% UT 2.2% 0.2% 2.4% -6.1%GA 4.7% 0.3% 5.1% -5.5% KY* 3.5% 0.5% 4.0% -9.1% MT 1.9% 0.3% 2.3% -8.7%SC* 4.4% 0.6% 5.0% -6.8% IA* 3.3% 0.6% 3.9% -0.1% ND* 1.7% 0.4% 2.2% -5.2%DE* 4.1% 0.8% 4.9% -7.8% NE* 3.6% 0.3% 3.9% 1.8% CA 1.8% 0.2% 2.0% -14.0%TX 4.5% 0.4% 4.9% -2.8% MI 3.6% 0.2% 3.8% -4.4% ID 1.8% 0.2% 2.0% -13.4%MD* 4.3% 0.6% 4.9% -5.7% HI* 2.3% 1.4% 3.7% -17.4% OR 1.6% 0.2% 1.9% -8.2%CT* 4.0% 0.9% 4.8% -7.4% WI* 3.1% 0.5% 3.6% -3.7% WA 1.6% 0.2% 1.8% -19.3%NY* 3.3% 1.4% 4.8% -9.2% MA 3.1% 0.5% 3.6% -11.9% CO 1.6% 0.1% 1.7% -4.8%

* Indicates Judicial State

-6.8%

STATE-BY-STATE RANKINGS BY NON-CURRENT LOAN POPULATION






MORTGAGE MONITOR

OCTOBER 2019 | 20

Mortgage Monitor Disclosures

You can reach us by email [email protected]

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OCTOBER 2019 DISCLOSURES



http://www.blackknightinc.com/wp-content/uploads/2018/09/BKI_MM-Disclosures.pdf

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mailto:Mortgage.Monitor%40bkfs.com%20?subject=

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MORTGAGE MONITOR

OCTOBER 2019 | 21

OCTOBER 2019 DEFINITIONS

TOTAL ACTIVE COUNT: All active loans as of month-end including loans in any state of delinquency or foreclosure. Post-sale loans and loans in REO are excluded from the total active count.

DELINQUENCY STATUSES (30, 60, 90+, ETC):

All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquent.

90 DAY DEFAULTS: Loans that were less than 90 days delinquent in the prior month and were 90 days delinquent, but not in foreclosure, in the current month.

FORECLOSURE INVENTORY: The servicer has referred the loan to an attorney for foreclosure. Loans remain in foreclosure inventory from referral to sale.

FORECLOSURE STARTS: Any active loan that was not in foreclosure in the prior month that moves into foreclosure inventory in the current month.

NON-CURRENT: Loans in any stage of delinquency or foreclosure.

FORECLOSURE SALE / NEW REO:

Any loan that was in foreclosure in the prior month that moves into post-sale status or is flagged as a foreclosure liquidation.

REO: The loan is in post-sale foreclosure status. Listing status is not a consideration, this includes all properties on and off the market.

DETERIORATION RATIO: The ratio of the percentage of loans deteriorating in delinquency status vs. those improving.



MORTGAGE MONITOR - Black Knight, Inc. · From there, we move on to the nation’s equity landscape,...

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