True Stories: Hybrid, eNote and RON Implementation

Join expert panelists that will discuss the status of federal legislation, trends in digital adoption and how best to prepare your organization for the next generation of lending processes.

Spruce’s Patrick Burns on innovation in title technology

In the season finale of Housing News season 5, Spruce CEO discusses heightened investor interest in title tech, innovation and fintech adoption.

Top CFPB official “hates” QM rules, jeopardizing safe harbor

A top CFPB official in charge of the rule-making process has heavily criticized the agency's own qualifying mortgage rule, jeopardizing safe harbor.

Fraud risk factors at closing increased almost 90% last quarter

A variety of risk factors could be contributing to the drastic increase in wire and title fraud risk factors in mortgage and real estate closings – for example, compliance issues and an increase in transaction data errors.

Mortgage

Black Knight: 2 million borrowers face rate resets

...increased risk in years ahead

There are approximately 2 million modified mortgages facing interest rate resets, and of that amount, 40% are currently underwater, Black Knight’s April Mortgage Monitor Report found. 

BK

(source: Black Knight, click image for larger photo)

Further supporting this, adjustable rate mortgages with notes below 6% were prepaying at significantly higher speeds than their fixed-rate mortgage counterparts, suggesting that concerns about rising interest rates persist among borrowers.

“We have seen a continual reduction in the number of underwater borrowers at the national level for some time now, but modified loans show a different picture,” said Kostya Gradushy, Black Knight’s manager of loan data and customer analytics.

The national negative equity rate sits at 9.4% of active mortgages. On the other side, the share of underwater modified loans facing interest rate resets is over 40%.

Meanwhile, another 18% of modified borrowers have 9% equity or less in their homes, causing some concern, Gradushy explained.

More than one of every 10 borrowers is in a ‘near negative equity’ position, meaning the borrower has less than 10% equity in his or her home.

“If you do not have about 10% equity in your home, you don’t make any money if you sell the house because closing costs are about 8%,” Jim Gaines, research economist with the Real Estate Center at Texas A&M University, explained.

And this comes amid a wave of lower mortgage rates and the 30-year, fixed-rate mortgage hitting the lowest level in almost nine months.

“Given that the data has shown quite clearly that equity — or the lack thereof — is one of the primary drivers of mortgage defaults, these resets may indeed pose an increased risk in the years ahead,” Gradushy added.  

Despite improvement in the overall situation for underwater borrowers, there are still areas in the country where borrowers are hovering at the edge. 

Most Popular Articles

Volume-hungry mortgage lenders loosen credit standards

Mortgage credit availability loosened up in April by 2.2%, per the MBA. The drivers were in conventional mortgages and GSE programs for ARMs and high-balance loans.

May 11, 2021 By

Latest Articles

Compass loses money, explores mortgage

Compass is exploring either building a mortgage arm, buying a mortgage company or following the lead of other resi brokerages and entering into a JV.

May 12, 2021 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please