The mortgage regulations put in place since the financial crisis of 2008 have more than paid their dividends in terms of mortgage performance.
Ten years later, mortgage delinquencies and foreclosures are at better-than-pre-crisis lows.
According to the most recent Mortgage Monitor report from Black Knight, delinquencies, serious delinquencies, active foreclosures and total non-current inventory ended 2018 below 2000-2005 pre-recession averages for the first time since the financial crisis.
Foreclosure sales (i.e., completed foreclosures), in particular, were down dramatically. There were 175,000 foreclosure sales last year, down 25% compared with 2017 and down 40% compared with the 2000-2005 period.
And, as long as there’s no major downturn in the economy and things quiet down on the natural disaster front, mortgage performance is expected to continue to improve.
At this rate, mortgage performance will hit all-time industry lows in 2019, the software, data and analytics firm says.
“Across the board, 2018 year-end numbers are good news from a mortgage performance perspective,” says Ben Graboske, president of Black Knight’s data and analytics division, in the report. “All four major performance metrics – delinquencies, serious delinquencies, active foreclosures and total non-current inventory – ended the year below pre-recession averages for the first time since the financial crisis.
“Just 576,000 foreclosures were initiated throughout the entirety of 2018 – an 18-year low – and the vast majority of these were repeat actions,” Grabsoke says. “In fact, first-time foreclosures were down 18 percent from the year before, hitting the lowest point we’ve seen since Black Knight started reporting the metric in 2000. Even repeats – though making up more than 60 percent of all foreclosures – were down six percent from 2017.
“These year-end numbers are further proof of what we’ve been observing for some time now,” he adds. “The high credit quality and corresponding lower risk we’ve seen in the post-crisis origination market for the better part of a decade continues to pay dividends in terms of mortgage performance.”
The fact that so many homeowners have refinanced in recent years has also helped. As Graboske points out, refinanced loans typically perform better, as borrowers can opt for lower payments or have more incentive to pay down faster.
“On top of that, we’ve had the benefit of strong employment and housing markets, which have helped the vast majority of homeowners meet their debt obligations, while those few who may have faced a possible default have gained enough equity to be able to sell rather than face foreclosure,” he adds.