Despite overall originations hitting the lowest level since 2010, the past year witnessed a significant increase in the volume of home equity loans and lines of credit, in addition to originating the best-performing mortgages on record, the first report from Black Knight Financial Services, previously known as Lender Processing Services, found. For jumbo mortgages, however, it's a completely different story.
Two key points about the November numbers stand out according to Herb Blecher, senior vice president of Black Knight Financial Services’ data & analytics division.
“First is that heightened credit standards have resulted in this year being the best-performing vintage on record. Even adjusting for some of these changes, such as credit scores and loan-to-values, we are seeing total delinquencies for 2013 loans at extremely low levels across every product category,” Blecher said.
The second point Blecher emphasized was that overall volumes are down. “We are seeing an increased proportion of the market being supported by non-agency (vs. government) lending – with the share nearly doubling as compared to 2010,” Blecher added.
However, increasing home prices have helped offset some of the drop in originations with demand for home equity loans increasing.
“While first mortgage originations are almost half the levels as one year ago, total home equity lending, including loans and lines, has increased by 70%, and originations of second lien home equity loans have more than doubled,” Blecher said.
In addition, the market also observed a 75% year-over-year increase in the share of non-agency jumbo prime lending.
“Notably, nearly all of these jumbo loans have been originated with no mortgage insurance, which may indicate an increased appetite for risk, as well as an opportunity to expand credit criteria, for originations within the private market,” Blecher explained.
The November data revealed that the population of “refi” mortgages has decreased by about 4 million loans since the end of 2012.
In comparison, just 5.9 million loans meet broad-based refinance criteria. But loosening the credit standards to just a 700 FICO increases the refinance population by almost 17%, or an additional 1 million loans.