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Lending

Originations, refinanceable population both go nose down

Black Knight's report details the why

Home price decline

Black Knight Financial Services' “Mortgage Monitor Report” observed a general decline in originations and in the overall “refinancible” population of both traditional and HARP-eligible borrowers, looking at data through the end of January 2014.

The report also found a similar decline in associated loan origination volumes, which declined 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,” said Herb Blecher, senior vice president of Black Knight Financial Services’ Data & Analytics division. “Overall originations were down almost 60% year-over-year, with HARP volumes down 70% over the same period.”

That 60% decline in loan originations brought them to the lowest point since Nov. 2008.

Still, property sales remained relatively strong – for the whole of 2013 sales were up 8.4% from 2012, but that was largely driven by cash purchases, which accounted for more than 40% of fourth-quarter sales alone.

Most substantially, HARP origination volume declined 70% from the same time last year, with fewer existing loans now eligible for the program – about 709,000 now versus 2.3 million in January 2013.

Separately, people are taking money out of their homes. The most recent data also marked 2013 as the first year in which home equity lending had increased since 2006.

The report found that home equity lending in 2013 was up 26% vs. 2012, but it's still down over 90% from 2006.

The decline in originations is largely tied to the increased mortgage interest rate environment, according to the Black Knight report, which is having a significant impact on the number of borrowers with incentive to refinance.

“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,” Blecher said. “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.”

While loan origination volume has declined year-over-year, property sales activity remained relatively strong through year-end 2013.

Black Knight found that the current resurgence in home equity origination is concentrated in so-called “super-prime” borrowers, with average credit scores for first- and second-lien HELOCs at 786 and 779, respectively.

This concentration has paid off in terms of loan performance: delinquency rates on HELOCs originated over the past four years have averaged at just 0.1%.

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