mortgage monitormonitor. july 2019 | 2. each month, the black knight mortgage monitor looks at a...

JULY 2019 REPORT

MORTGAGE MONITOR

https://www.blackknightinc.com/data-reports/?report-type=mortgage-monitor&report-year=2018

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Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, and/or an affiliate. © 2019 Black Knight Financial Technology Solutions, LLC. All Rights Reserved.

MORTGAGE MONITOR

JULY 2019 | 2Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, and/or an affiliate. © 2019 Black Knight Financial Technology Solutions, LLC. All Rights Reserved.

Each month, the Black Knight Mortgage Monitor looks at a variety of issues related to the mortgage finance and housing industries.

This month, as always, we begin with a review of some of the high-level mortgage performance statistics reported in our most recent First Look report, with an update on delinquency, foreclosure and prepayment trends. We then take a deeper dive into mortgage performance and prepayment data for the month of July, along with a detailed breakdown of changing prepayment drivers in recent months.

With 30-year mortgage interest rates hitting a three-year low in recent weeks, we next provide an update on refinance incentive in the market. In addition to quantifying the size of the population of refinance candidates, we also look more broadly at the number of borrowers with interest rates higher than today’s prevailing rate. Finally, we revisit the nation’s equity landscape, finding that Q2 growth has resulted in an all-time high for tappable equity. We also explore how falling 30-year interest rates have reshaped the cash-out refinance market and explore second quarter servicer retention rates.

In producing the Mortgage Monitor, Black Knight’s Data & Analytics division aggregates, analyzes and reports upon the most recently available data from the company’s vast mortgage and housing related data assets. Information is gathered from the McDash loan-level mortgage performance dataset, the Black Knight HPI and the company’s robust public property records database covering 99.9% of the U.S. population. For more information on gaining access to Black Knight’s data assets, please call 844-474-2537 or email [email protected].

JULY 2019 OVERVIEW

MORTGAGE MONITOR

JULY FIRST LOOK RELEASE

JULY MORTGAGE PERFORMANCE UPDATE

REFINANCE INCENTIVE

EQUITY & RETENTION UPDATE

APPENDIX

DISCLOSURES

DEFINITIONS

3

4

7

10

16

19

20

CONTENTS




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MORTGAGE MONITOR

JULY 2019 | 3

Here we have an overview of findings from Black Knight’s ‘First Look’ at July mortgage performance data. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

JULY 2019 FIRST LOOK RELEASE

As 30-year rates didn’t drop into the 3.75% range until the end of June, a 30-45 day closing window means July's spike in prepayments is just the beginning of the manifestation of increased refinance incentive

JULY OVERVIEW STATS

CHANGE IN DELINQUENCY RATE

July’s decline in the national delinquency rate offset the bulk of

June’s 11% spike

At 3.46% of active mortgages, delinquencies are just slightly above –

the record low in May 2019

SERIOUS DELINQUENCIES

Serious delinquencies continue to improve, hitting their lowest level in

more than 13 years

The seriously delinquent population fell below 445K for the first time since

June 2006

PREPAYMENT RATE

July’s jump in prepayment activity is the latest – and loudest – sign of increased refinance incentive

manifesting in the market

Prepayments are now up nearly 60% from this time last year

25.7%-11K-7.3%



https://www.blackknightinc.com/black-knights-first-look-at-july-2019-mortgage-data/


http://www.blackknightinc.com/wp-content/uploads/2019/09/BKI_MM_Jul2019_Chart01.pdf




MORTGAGE MONITOR

JULY 2019 | 4

Here, we take a closer look at mortgage performance and prepayment data for the month of July, along with a detailed breakdown of changing prepayment drivers in recent months. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

JULY 2019 JULY MORTGAGE PERFORMANCE HIGHLIGHTS

» After June's calendar-driven spike, the national delinquency rate recovered strongly in July

» Delinquencies fell 7% from June, and are now down more than 4% from one year ago

» July 2019’s delinquency rate of 3.46% is the lowest for any July on record dating back to 2000

» The national delinquency rate is now more than 1% below the pre-recession average for the first time in 2019 after first crossing that threshold in late 2018

» A subpar start to the year had tightened that spread early in 2019, with the national delinquency rate coming within 0.66% of its long-term average last month

» The national delinquency is now back to within 0.10% of the all-time low seen in May of this year

3.46%

4.47%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

2000

-07

2001

-07

2002

-07

2003

-07

2004

-07

2005

-07

2006

-07

2007

-07

2008

-07

2009

-07

2010

-07

2011

-07

2012

-07

2013

-07

2014

-07

2015

-07

2016

-07

2017

-07

2018

-07

2019

-07

NATIONAL DELINQUENCY RATE – FIRST LIEN MORTGAGESDelinquency Rate 2000-2005 Average Record Low A strong July improved delinquency

rates in a month where performance typically sees seasonal declines

NATIONAL DELINQUENCY RATE – FIRST LIEN MORTGAGES






MORTGAGE MONITOR

JULY 2019 | 5

1.25

%

1.12

%

1.08

%

1.21

%

1.30

%

1.30

%

1.29

%

1.23

%

1.21

% 1.56

%

1.26

%

1.12

% 1.33

%

2.80

%

+0%

+100%

+200%

+300%

+400%

+500%

+600%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Vintage

PREPAYMENT SPEEDS (SMM) BY VINTAGEJanuary 2019 July 2019 6-Month Percent Change (Right Axis)

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2007

-07

2008

-07

2009

-07

2010

-07

2011

-07

2012

-07

2013

-07

2014

-07

2015

-07

2016

-07

2017

-07

2018

-07

2019

-07

PREPAYMENT RATE (SMM) BY INVESTOR / PRODUCTGSE FHA/VA Portfolio Private Securities Total Market


» Overall prepayment activity increased by 26% M/M in July, and is now up by more than 140% over the past six months, after hitting a more than 18-year low in January

» July’s single month mortality (SMM) marked the highest prepayment rate of any month in nearly three years

» The largest single-month increases were among 2018 vintage loans (which jumped 52% from June), high credit score loans (+27%), fixed rate mortgages (+29%) and GSE loans (+32%)

» FHA/VA loans saw the largest aggregate increase over the past six months, with prepayment rates up nearly 200% from where they bottomed out in January

» FHA/VA loans are now prepaying at the fastest rate of any investor class with a July SMM of 1.63% compared to the market average of 1.43%

» 2018 vintage loans continue to lead the market, prepaying at an 80% higher rate than any other single vintage in July

» Overall, 2018 vintage prepays are up by more than 4.5X from just six months ago (more than 3X the increase in the market as a whole)

» This trend may well continue, as 98% of 2018 vintage loans have rates above the going FHLMC 30-year fixed rate, while 80% have rates 0.75% or more above that rate as of Sept. 5, 2019

PREPAYMENT RATE (SMM) BY INVESTOR / PRODUCT PREPAYMENT SPEEDS (SMM) BY VINTAGE






MORTGAGE MONITOR

JULY 2019 | 6

» Overall prepays were up 26%, but rate/term-driven prepayments jumped 70% from June to July; refinance-specific driven prepays (including cash-outs) were up 47% for the month

» In total, refinances accounted for 78BPS of SMM for the month – the highest since December 2016 – representing 55% of total SMM

» While overall prepays have doubled (+117%) since November 2018 when rate/term refis hit their trough, refinance-driven prepays specifically are up by 280%

» As rates didn’t hit 3.6% until the second week of August, we have yet to see their full impact in terms of refinance and prepayment activity and may not know the extent until September or October closings are recorded

» The next six months could see roughly 25BPS of SMM headwind as home sales cool seasonally; if rates remain low, overall prepayments may fall despite rising refinance originations

38 66 63 61 58 48

29 20 18 14 17 17 17 21 18 25 21 18 16 12 11 9 9 7 7 8 6 7 5 6 9 15 17 24 35 30

50

28

38 37 39 39 37

28 23 24 21 24 24 23

28 25 30

28 26 24 21 23 21 21 19 19 20 17 19 15 16 15 16 19

22 25

23

28

46

48 40 37 34

36

26 25

39 39

51 56 49 51

40 41

36 35

26 26

38 42 50 55 51 50 36 39

34 32 23 24

35 41

50 50

52 7

8 7 7

6 8

7

7

9 7

8 8 7

7

8

10 8

9 8

8 10 8

8 9 8 11

8 9

8 8 8

8

9

9

10 8

10 6

7 6 6

6 6

6

6

6 6

6 6

5 6

5

6 5

5 4

4

5 5 5 6 4 5

4 4

3 4 3

3

4

4

3 3

3

-

20

40

60

80

100

120

140

160

180

20160

7

20160

8

20160

9

20161

0

20161

1

20161

2

20170

1

20170

2

20170

3

20170

4

20170

5

20170

6

20170

7

20170

8

20170

9

20171

0

20171

1

20171

2

20180

1

20180

2

20180

3

20180

4

20180

5

20180

6

20180

7

20180

8

20180

9

20181

0

20181

1

20181

2

20190

1

20190

2

20190

3

20190

4

20190

5

20190

6

20190

7

Prep

aym

ent R

ate

(SM

M) i

n BP

S

PREPAY ACTIVITY (SMM) BY CAUSE OF PREPAYMENT(36-MONTH DETAILED BREAKDOWN)

Rate/Term Refi Cash-out Refi Sale of Home Curtailment DefaultOverall refinance-driven prepays are now nearly 3X what they were in November when 30-year rates were nearing 5%

PREPAY ACTIVITY (SMM) BY CAUSE OF PREPAYMENT(36-MONTH DETAILED BREAKDOWN)






MORTGAGE MONITOR

JULY 2019 | 7

With 30-year mortgage interest rates hitting a three-year low in recent weeks, here we provide an update on refinance incentive in the market. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

JULY 2019 REFINANCE INCENTIVE

» Interest rates continue to fall, but didn’t hit ≤ 3.6% until early August, meaning the largest impact to prepays and refis is still to come

» As of September 5th, rates had fallen further, to 3.49%, meaning that rate decline-driven refis/prepayment activity could well continue to ramp up in August and September and beyond

» We should note the tightening spread between 30-year and 5/1 ARM rates, which – along with improved affordability due to falling 30-year rates – suggests likely limited ARM demand

15.Nov '184.94%

28.Mar '194.06%

6.Jun '193.82%

5.Sept '193.49%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

06.Sep 04.Oct 01.Nov 29.Nov 27.Dec 24.Jan 21.Feb 21.Mar 18.Apr 16.May 13.Jun 11.Jul 08.Aug 05.Sep

FREDDIE MAC – PRIMARY MORTGAGE MARKET SURVEY 30-Yr FRM 15-Yr FRM 5/1-Yr ARM July’s 26% rise in prepayment activity

was driven by 30-year interest rates of 3.82% back in June

FREDDIE MAC – PRIMARY MORTGAGE MARKET SURVEY






MORTGAGE MONITOR

JULY 2019 | 8


M

5M

10M

15M

20M

25M

30M

2000

-02

2000

-06

2000

-10

2001

-02

2001

-06

2001

-10

2002

-02

2002

-06

2002

-10

2003

-02

2003

-06

2003

-10

2004

-02

2004

-06

2004

-10

2005

-02

2005

-06

2005

-10

2006

-02

2006

-06

2006

-10

2007

-02

2007

-06

2007

-10

2008

-02

2008

-06

2008

-10

2009

-02

2009

-06

2009

-10

2010

-02

2010

-06

2010

-10

2011

-02

2011

-06

2011

-10

2012

-02

2012

-06

2012

-10

2013

-02

2013

-06

2013

-10

2014

-02

2014

-06

2014

-10

2015

-02

2015

-06

2015

-10

2016

-02

2016

-06

2016

-10

2017

-02

2017

-06

2017

-10

2018

-02

2018

-06

2018

-10

2019

-02

2019

-06

BREAKDOWN OF 'IN THE MONEY' 30-YEAR MORTGAGES 30-Yr Mortgage Holders with Rate ≥0.75% Above Current FHLMC Rate

Current on Mortgage Payments, 720+ Credit Score, and ≤80%LTVSept 5th 30YR – 3.49%

11.7M

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

M

2M

4M

6M

8M

10M

12M

14M

2001

-09

2002

-09

2003

-09

2004

-09

2005

-09

2006

-09

2007

-09

2008

-09

2009

-09

2010

-09

2011

-09

2012

-09

2013

-09

2014

-09

2015

-09

2016

-09

2017

-09

2018

-09

TOD

AY*

REFINANCE CANDIDATES IN MILLIONS

Refinance Candidates (Left Axis) Freddie 30-Year Fixed Rate (Right Axis)

Refinance Candidates: Homeowners current on their mortgage with 720+ credit scores and >= 20% equity in their home that could reduce their interest rate by 0.75% or more by refinancing into a 30-year fixed rate mortgage at the prevailing interest rate

» More than half of all homeowners with a 30-year mortgage (24.5M) now have a rate 0.75% or more above the FHMLC prevailing rate as of September 5th (3.49%), the largest this population has been since early-2013

» One in four (11.7M) also meet broad-based underwriting criteria as well, the largest number of “high quality” refinance candidates since Black Knight began tracking the data point in 2000

» Along with interest rates falling to multi-year lows, the population has been further swelled by a combination of higher interest rates and credit quality of recent originations along with rising home prices improving equity positions and CLTVs of would-be refinance candidates

» 5M mortgages were originated in Q2-Q4 2018 when rates averaged 4.5% or higher, representing 10% of the active mortgage universe; as such, the 2018 vintage represents 17% of all refinance candidates

» Pre-2004 vintages contain a large volume of refinance candidates as well, with nearly all in a position to save 1.75% or more on their first-lien rate

» Given their large volume and high interest rates of this population, it may be worthwhile for lenders to identify and reach out around 30-year to 10-year refinance campaigns

» The 2012 and 2016 vintages – though representing a small share of the population of refinance candidates – are well-represented in refinance originations as borrowers capitalize upon the equity they've built in their homes

REFINANCE CANDIDATES IN MILLIONS BREAKDOWN OF 'IN THE MONEY' 30-YEAR MORTGAGES

Refinance Candidates: Homeowners current on their mortgage with 720+ credit scores and > = 20% equity in their home that could reduce their interest rate by 0.75% or more by refinancing into a 30-year fixed rate mortgage at the prevailing interest rate






MORTGAGE MONITOR

JULY 2019 | 9

» The rate of a annual home price appreciation rose in July for the first time since February 2018

» Home prices were up by 0.34% for the month, increasing the annual home price growth rate to 3.9%

» Over those 16 months, annual home price growth had fallen from a peak of 6.75% in February 2018 to 3.7% as of June

» It’s important to note that the slowdown didn’t equate to falling home prices at the national level; in fact, July marked 87 consecutive months of annual home price growth

» July’s HPI shows year-over-year home price growth in all 50 states as well as 99 of the 100 largest U.S. housing markets

» San Jose (the most expensive market in the country) was the lone exception; home prices there were down 6.4% year-over-year

July '19:+3.9%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

2%

4%

6%

8%

10%

2012

-11

2013

-02

2013

-05

2013

-08

2013

-11

2014

-02

2014

-05

2014

-08

2014

-11

2015

-02

2015

-05

2015

-08

2015

-11

2016

-02

2016

-05

2016

-08

2016

-11

2017

-02

2017

-05

2017

-08

2017

-11

2018

-02

2018

-05

2018

-08

2018

-11

2019

-02

2019

-05

2019

-08

Fred

die

30-Y

ear F

ixed

Inte

rest

Rat

e

Annu

al R

ate

of H

ome

Pric

e Ap

prec

iatio

n

HOME PRICE APPRECIATION VS 30-YR FIXED INTEREST RATEAnnual Home Price Appreciation (Left Axis) 30-Year Fixed Interest Rate After 16 straight months of declines, falling

interest rates have helped to improve the national affordability landscape and stem the slowdown in home prices

HOME PRICE APPRECIATION VS 30-YR FIXED INTEREST RATE






MORTGAGE MONITOR

JULY 2019 | 10

Here, we revisit the subject of tappable equity, with a closer look at its growth in Q2 2019. We also explore how falling 30-year interest rates have reshaped the cash-out refinance market and explore second quarter servicer retention rates. This information has been compiled from Black Knight’s Home Price Index and the company’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution

JULY 2019 EQUITY & RETENTION UPDATE

+16.5%

+4.2%

+0.0%

+5.0%

+10.0%

+15.0%

+20.0%

+25.0%

2016-09

2016-12

2017-03

2017-06

2017-09

2017-12

2018-03

2018-06

2018-09

2018-12

2019-03

2019-06

ANNUAL GROWTH RATE OF TAPPABLE EQUITY

$4,285

$4,914

$4,627

$3,755

$2,830

$2,603

$2,370

$2,234

$2,557

$3,123

$3,557

$4,122

$4,690

$5,425

$5,806

$6,061

$5,943

$5,714

$5,982

$6,317

$

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2004-12

2005-12

2006-12

2007-12

2008-12

2009-12

2010-12

2011-12

2012-12

2013-12

2014-12

2015-12

2016-12

2017-12

2018-03

2018-06

2018-09

2018-12

2019-03

2019-06

Tapp

able

Equ

ity in

$B

illio

ns

TAPPABLE EQUITY OF U.S. MORTGAGE HOLDERS

Tappable Equity: Equity available on all residential properties with an existing mortgage before reaching a current CLTV of 80%

» After falling due to both seasonal pressures and a slowing housing market in Q3 and Q4 2018, tappable equity grew for the 2nd straight quarter in Q2 2019

» As of the end of the second quarter, tappable equity reached an all-time high of $6.3 trillion

» 45M homeowners with mortgages now have an average of $140K in equity available to them before reaching a maximum combined loan-to-value ratio of 80%

» Tappable equity is now 26% above the pre-recession peak of $5T set in Q2 2006

» The annual growth rate of tappable equity rose slightly in Q2 to 4.2% from Q1 growth slightly above 3%

TAPPABLE EQUITY OF U.S. MORTGAGE HOLDERS ANNUAL GROWTH RATE OF TAPPABLE EQUITY








MORTGAGE MONITOR

JULY 2019 | 11


$566B $194B

$193B

$418B

$128B

$807B

$97B

$120B

$131B

$208B$146B

$293B

TAPPABLE EQUITY BY CBSA – Q2 2019TAPPABLE EQUITY BY CBSA – Q2 2019

Green = Markets that have seen their total tappable equity decline over the past 12 months

» A handful of notable markets – including San Jose, CA; Seattle, WA; Denver, CO; and Portland, OR – saw year-over-year declines in tappable equity

» While the Denver and Portland declines were marginal, Seattle (-4%) and San Jose (-10%) fell much more noticeably

96 of the 100 largest U.S. housing markets experienced rises in tappable equity over the past 12 months





MORTGAGE MONITOR

JULY 2019 | 12


» Even with the Q2 2019 decline, San Jose ranks fourth in terms of tappable equity by market, despite being the 34th largest market by population

» Los Angeles, despite slowing home price growth, crossed over the $800B mark for the first time since 2006; it’s the only single market to ever have more than $600B in tappable equity

» The top 10 markets continue to represent nearly 50% of the nation’s tappable equity, as compared to the 15% held by the spots 11-20

» While California maintains a significant lead over all other states with $2.3T in tappable equity, its growth rate slowed to just 0.2% over the past 12 months as rising interest rates and tightening affordability slowed home price growth in many of the largest West Coast markets

$144B

$171B

$189B

$210B

$219B

$265B

$278B

$339B

$346B

$2,305B

$B $500B $1,000B $1,500B $2,000B $2,500B

Georgia

Massachusetts

New Jersey

Illinois

Colorado

Washington

New York

Florida

Texas

California

TAPPABLE EQUITY COMPARISON BY STATE(TOP 10 STATES BY TAPPABLE EQUITY VOLUME)

2019-Q2 2018-Q2

$131B

$146B

$172B

$193B

$194B

$208B

$293B

$418B

$566B

$807B

$B $200B $400B $600B


$800B

Los Angeles, CA

San Francisco, CA

New York-Newark, NY-NJ

San Jose, CA

Chicago, IL

Washington, DC

Seattle, WA

San Diego, CA

Boston, MA

Dallas, TX

TAPPABLE EQUITY COMPARISON BY CBSA(TOP 10 CBSAS BY TAPPABLE EQUITY VOLUME)

2019-Q2 2018-Q2


TAPPABLE EQUITY COMPARISON BY CBSA(TOP 10 CBSAS BY TAPPABLE EQUITY VOLUME)

TAPPABLE EQUITY COMPARISON BY STATE(TOP 10 STATES BY TAPPABLE EQUITY VOLUME)






MORTGAGE MONITOR

JULY 2019 | 13

7% 10% 12%16%

55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Below 620 620 to 679 680 to 719 720 to 759 760Plus

DISTRIBUTION OF TAPPABLE EQUITY(BY CREDIT SCORE AND FIRST LIEN INTEREST RATE BUCKET)

Below 4.25% 4.25% and Above

The bulk (55%) of those same borrowers have credit scores of 760+,

another 16% between 720 and 759

$1,200B

$1,000B

$000B

$600B

$400B II $200B

$OB

DISTRIBUTION OF TAPPABLE EQUITY (BY FIRST LIEN INTEREST RATE)

---• 49% of mortgage holders with Tappable Equity have first lien rates � 4.25%

76% have rates�3.75%

1111 •• ----•BLACK.KNIGHT"

» Falling rates – along with rising home prices – have cleared the path for an increase in cash-out lending in Q3 2019

» Nearly half of tappable equity holders have current first lien rates of 4.25% or higher, making cash-out refinance an attractive option for those wishing to access the equity in their homes

» 76% of tappable equity holders have interest rates of 3.75% or higher, meaning they could potentially tap into home equity with little change to their existing 30-year rate, or perhaps even a slight improvement

» More than half of this population has credit scores of 760 or above, making for a relatively low-risk market segment; another 16% have scores between 720-759

» While cash-out lending hasn’t seen the same surge as rate/term refinance lending has in recent months, significant attrition risk/retention opportunity still exists among high equity borrowers

» Even with falling rates significantly boosting rate/term refinances, cash-out activity accounted for 62% of refinance lending in Q2 2019 and 65% in the first half of 2019 overall

DISTRIBUTION OF TAPPABLE EQUITY(BY FIRST LIEN INTEREST RATE)

DISTRIBUTION OF TAPPABLE EQUITY(BY CREDIT SCORE AND FIRST LIEN INTEREST RATE BUCKET)


The bulk (55%) of those sameborrowers have credit scores of 760+,

another 16% between 720 and 759

49% of mortgage holders with Tappable Equity have first lien rates ≥4.25%

76% have rates ≥3.75%






MORTGAGE MONITOR

JULY 2019 | 14

» 2018 saw servicer retention rates fall to decade lows as refinance candidates dried up in a rising interest rate environment

» In Q2 2019, servicers retained 24% of refinancing borrowers, the highest such retention rate since late 2017

» Retention of rate/term refinance borrowers improved even more, hitting 30% in Q2 after languishing below 20% for much of 2018

» However, even amidst record-high tappable equity and falling interest rates, retention rates of cash-out refinance borrowers– accounting for 62% of all refinance lending in Q2 2019 –reflect just one in five being retained

» While cash-out retention rates are up slightly from a Q2 2014 low of 16%, they’re still noticeably below the market average and 10% below rate/term refinances, despite representing the bulk of refinance originations in Q2

» Fine-tuning data-driven retention strategies around cash-out refinance lending could help servicers grow market share, particularly in an environment of so many high-quality refinance candidates being courted by the competition

20%

30%

24%

0%

10%

20%

30%

40%

50%

60%

70%

2005

-Q2

2005

-Q3

2005

-Q4

2006

-Q1

2006

-Q2

2006

-Q3

2006

-Q4

2007

-Q1

2007

-Q2

2007

-Q3

2007

-Q4

2008

-Q1

2008

-Q2

2008

-Q3

2008

-Q4

2009

-Q1

2009

-Q2

2009

-Q3

2009

-Q4

2010

-Q1

2010

-Q2

2010

-Q3

2010

-Q4

2011

-Q1

2011

-Q2

2011

-Q3

2011

-Q4

2012

-Q1

2012

-Q2

2012

-Q3

2012

-Q4

2013

-Q1

2013

-Q2

2013

-Q3

2013

-Q4

2014

-Q1

2014

-Q2

2014

-Q3

2014

-Q4

2015

-Q1

2015

-Q2

2015

-Q3

2015

-Q4

2016

-Q1

2016

-Q2

2016

-Q3

2016

-Q4

2017

-Q1

2017

-Q2

2017

-Q3

2017

-Q4

2018

-Q1

2018

-Q2

2018

-Q3

2018

-Q4

2019

-Q1

2019

-Q2

SERVICER RETENTION RATE OF REFINANCE TRANSACTIONSCash-out Refinances Rate/Term Refinances All Refinances

2019-Q1 retention rates have been updated to reflect subsequent public records recordings2019-Q2 retention rates estimated based on public records through July 2019

Falling rates and easy access to refinance candidates pushed retention rates up significantly in Q2 2019


SERVICER RETENTION RATE OF REFINANCE TRANSACTIONS





MORTGAGE MONITOR

JULY 2019 | 15

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pre

-200

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vintage of Mortgage Being Refinanced

BREAKDOWN OF REFINANCE ORIGINATIONS – Q1/Q2 2019 (BY PRIOR LOAN VINTAGE)

Cash-out Refinance Rate/Term Refinance

Cash-out refinances identified as borrowers who increased their balance by more than 5 percent through a refinance transaction

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Pre

-200

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Vintage of Mortgage Being Refinanced

RETENTION RATES BY PRIOR LOAN VINTAGE(REFINANCE ORIGINATIONS IN Q1 & Q2 2019)

Distribution of Refinance Originations Retention Rate

» Retention is decidedly strong among borrowers refinancing out of 2018 vintage mortgages – a group accounting for nearly 20% of all refinance transactions over the first half of 2019

» Some 35% of these borrowers were retained by their servicers post-refinance as compared to 23% for the market overall in Q1 and Q2 combined

» As 17% of the now 11.7M remaining refinance candidates are in 2018 vintage loans, retaining their business should be a top priority given today’s market make-up

» Three out of four borrowers refinancing a 2018 vintage mortgage are simply taking advantage of rates, and not tapping into any equity in their home – as opposed to nearly 80% of 2012-2017 borrowers who are pulling cash out

» Savvy lenders and servicers need to go beyond the low hanging fruit of 2018 vintage loans and capture additional market share where others are missing out

» As noted earlier, retention rates are significantly lower on cash-outs, and while their share of refinance lending has fallen this year, cash-out refis still make up nearly two-thirds of all refinances in 2019 thus far

» Appropriately identifying these borrowers and the products they are looking for can help focus marketing efforts to increase both retention and growth of those more competitive market segments

» When the current "boomlet" fades, it will be important to understand and serve the needs of borrowers refinancing out of other post-recession vintages

BREAKDOWN OF REFINANCE ORIGINATIONS – Q1/Q2 2019(BY PRIOR LOAN VINTAGE)

RETENTION RATES BY PRIOR LOAN VINTAGE(REFINANCE ORIGINATIONS IN Q1 & Q2 2019)







MORTGAGE MONITOR

JULY 2019 | 16

Jul-19 Monthly Change YTD Change Yearly

ChangeDelinquencies 3.46% -7.27% -7.77% -4.25%

Foreclosure 0.49% -0.49% -3.33% -13.20%

Foreclosure Starts 39,200 -2.24% -21.91% -18.84%

Seriously Delinquent (90+) or in Foreclosure 1.34% -1.74% -9.38% -15.73%

New Originations (data as of Jun-19) 625K -7.4% 39.1% 0.3%

Jul-19 Jun-19 May-19 Apr-19 Mar-19 Feb-19 Jan-19 Dec-18 Nov-18 Oct-18 Sep-18 Aug-18 Jul-18

Delinquencies 3.46% 3.73% 3.36% 3.47% 3.65% 3.86% 3.75% 3.88% 3.71% 3.64% 3.97% 3.50% 3.61%

Foreclosure 0.49% 0.50% 0.49% 0.50% 0.51% 0.51% 0.51% 0.52% 0.52% 0.52% 0.52% 0.54% 0.57%

Foreclosure Starts 39,200 40,100 39,000 41,400 39,700 40,300 50,200 46,300 45,200 50,600 40,000 47,100 48,300

Seriously Delinquent (90+) or in Foreclosure 1.34% 1.37% 1.37% 1.40% 1.45% 1.47% 1.48% 1.51% 1.50% 1.48% 1.51% 1.52% 1.59%

New Originations 625K 675K 591K 515K 417K 383K 449K 478K 539K 498K 618K 582K

3.61

%

3.50

%

3.97

%

3.64

%

3.71

%

3.88

%

3.75

%

3.86

%

3.65

%

3.47

%

3.36

% 3.73

%

3.46

%

Jul-1

8

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-1

9

Feb-19

Mar-19

Apr-19

May-19

Jun-1

9Ju

l-19

TOTAL DELINQUENCIES

582K

618K

498K

539K

478K

449K

383K

417K 51

5K 591K 67

5K

625K

Jul-1

8

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-1

9

Feb-19

Mar-19

Apr-19

May-19

Jun-1

9

NEW ORIGINATIONS

JULY 2019 DATA SUMMARY

JULY 2019 APPENDIX





MORTGAGE MONITOR

JULY 2019 | 17

Month TOTAL ACTIVE COUNT 30 DAYS 60 DAYS 90+ DAYS FC Total NC FC Starts Average Days

Delinquent for 90+Average Days

Delinquent for FCRatio of 90+

to FC

1/31/05 47,706,128 1,197,062 339,920 458,719 276,745 2,272,446 50,922 242 324 165.8%1/31/06 50,900,620 1,242,434 387,907 542,378 258,613 2,431,332 76,477 207 308 209.7%1/31/07 53,900,458 1,425,030 468,441 551,439 393,973 2,838,883 117,419 203 267 140.0%1/31/08 55,478,782 1,743,420 676,266 950,639 813,560 4,183,885 195,033 190 256 116.8%1/31/09 55,788,441 2,001,314 932,436 1,878,981 1,321,029 6,133,760 250,621 193 323 142.2%1/31/10 55,098,009 1,945,589 903,778 2,972,983 2,068,572 7,890,922 292,308 253 418 143.7%1/31/11 53,861,778 1,750,601 746,634 2,078,130 2,245,250 6,820,615 277,374 333 527 92.6%1/31/12 52,687,781 1,592,463 652,524 1,796,698 2,205,818 6,247,503 223,394 395 666 81.5%1/31/13 51,229,692 1,464,583 587,661 1,551,415 1,742,689 5,346,348 156,654 460 803 89.0%1/31/14 50,380,779 1,341,074 529,524 1,278,955 1,213,046 4,362,599 97,467 486 935 105.4%1/31/15 50,412,744 1,238,453 465,849 1,060,002 884,901 3,649,204 93,280 509 1,031 119.8%1/31/16 50,541,353 1,298,682 444,594 831,284 659,237 3,233,797 71,900 495 1,047 126.1%1/31/17 50,871,357 1,108,712 389,768 663,521 480,598 2,642,599 70,357 454 1,013 138.1%1/31/18 51,155,753 1,083,162 412,676 706,623 336,613 2,539,074 62,312 364 932 209.9%1/31/19 51,896,438 1,074,044 367,750 503,655 264,875 2,210,325 50,196 391 830 190.1%2/28/19 51,854,081 1,138,116 362,154 500,822 263,707 2,264,798 40,289 385 839 189.9%3/31/19 52,081,244 1,061,924 348,443 492,889 264,451 2,167,707 39,657 391 853 186.4%4/30/19 52,228,211 1,003,514 335,160 473,565 259,290 2,071,529 41,356 393 880 182.6%5/31/19 52,304,596 965,815 332,992 461,036 255,386 2,015,229 38,970 394 897 180.5%6/30/19 52,288,778 1,145,626 349,170 454,890 259,274 2,208,960 40,126 364 920 175.4%7/31/19 52,260,606 1,020,037 343,343 443,500 257,859 2,064,739 39,189 369 908 172.0%

LOAN COUNTS AND AVERAGE DAYS DELINQUENT

JULY 2019 APPENDIX





MORTGAGE MONITOR

JULY 2019 | 18

STATE-BY-STATE RANKINGS BY NON-CURRENT LOAN POPULATION

JULY 2019 APPENDIX





MORTGAGE MONITOR

JULY 2019 | 19

Mortgage Monitor Disclosures

You can reach us by email [email protected]

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JULY 2019 DISCLOSURES



http://www.blackknightinc.com/wp-content/uploads/2018/09/BKI_MM-Disclosures.pdf

http://www.blackknightinc.com/wp-content/uploads/2018/09/BKI_MM-Disclosures.pdf

mailto:Mortgage.Monitor%40bkfs.com%20?subject=

https://twitter.com/black_knightinc?lang=en


MORTGAGE MONITOR

JULY 2019 | 20

JULY 2019 DEFINITIONS

TOTAL ACTIVE COUNT: All active loans as of month-end including loans in any state of delinquency or foreclosure. Post-sale loans and loans in REO are excluded from the total active count.

DELINQUENCY STATUSES (30, 60, 90+, ETC):

All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquent.

90 DAY DEFAULTS: Loans that were less than 90 days delinquent in the prior month and were 90 days delinquent, but not in foreclosure, in the current month.

FORECLOSURE INVENTORY: The servicer has referred the loan to an attorney for foreclosure. Loans remain in foreclosure inventory from referral to sale.

FORECLOSURE STARTS: Any active loan that was not in foreclosure in the prior month that moves into foreclosure inventory in the current month.

NON-CURRENT: Loans in any stage of delinquency or foreclosure.

FORECLOSURE SALE / NEW REO:

Any loan that was in foreclosure in the prior month that moves into post-sale status or is flagged as a foreclosure liquidation.

REO: The loan is in post-sale foreclosure status. Listing status is not a consideration, this includes all properties on and off the market.

DETERIORATION RATIO: The ratio of the percentage of loans deteriorating in delinquency status vs. those improving.



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