Mortgage delinquencies continued to fall in January, dropping 2.96% compared to December to reach 6.27% of all mortgages, according to Black Knight Financial Services' monthly Mortgage Monitor Report.
What's more, the number of homes in foreclosure – also known as the foreclosure inventory – fell 5.32% in January, compared to December, to reach 2.35% of all homes with a mortgage.
So, what's the bad news? Mortgage origination volume continued to decline as well, to reach its lowest level since November 2008, according to the report. In addition, there has been a decline in the overall ‘refinancible’ population of both traditional and Home Affordable Refinance Program (HARP)-eligible borrowers, with associated loan origination volumes dropping in both categories as well.
‘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,’ says Herb Blecher, senior vice president of Black Knight Financial Services' data and analytics division, in a release. ‘Overall originations were down almost 60 percent year over year, with HARP volumes (according to the most recent Federal Housing Finance Agency report) down 70 percent over the same period.’
Blecher adds that the declines ‘are largely tied to the increased mortgage interest rate environment, which is having a significant impact on the number of borrowers with an incentive to refinance. A high-level view of this refinancible population shows a decline of about 13 percent just over the last two months.’
‘Of course, in addition to higher interest rates, a good deal of this decline can be attributed to the fact that a majority of those who could refinance at historically low rates in recent years already have, and we see a similar dynamic in terms of HARP-eligible loans,’ he says. ‘The volume of HARP refinances over the past year has driven this population down to about 700,000 loans in January 2014, as compared to over 2.3 million at the same time last year. From a geographic perspective, outside of Florida and Nevada, we see the midwestern states of Illinois, Michigan, Missouri and Ohio have among the highest percentage of HARP eligibility.’
The report points out that although origination volume is down, property sales have remained relatively strong due to a lack of inventory and strong investor activity. During the fourth quarter of 2013, all-cash sales accounted for about 40% of all home sales – an increase of about 25% compared to the fourth quarter of 2012.
The report shows that 2013 was the first year in which home equity lending had increased since 2006 – though total home equity volumes (including both loans and lines of credit) were still down more than 90% from that time. The report notes the home equity loans are – at least for now – concentrated in so-called ‘super-prime’ borrowers, with average credit scores for first- and second-lien home equity loans at 786 and 779, respectively.