A new report by Black Knight Financial Services shows that there are currently 39 million homeowners who can tap their equity to refinance with a current combined loan-to-value (CLTV) ratios of less than 80%. There are now just 2.2 million homeowners who are underwater (negative equity) on their mortgages, which is one million fewer than at the start of 2016 and the lowest number since 2007.
Black Knight said that the share of tappable equity held by borrowers with a first lien interest rate above the average 30-year fixed rate dropped from 73 percent in October to just 33 percent as of Dec. 29, 2016. There are three states with negative equity rates more than twice the national average. These states include Nevada, Missouri and New Jersey. Atlantic City leads the nation, with 23% of homeowners who are underwater on their mortgages, followed by St. Louis at 20%.
Black Knight Data & Analytics Executive Vice President Ben Graboske had said, “The negative equity situation has improved substantially since the height of the great recession. On the other hand, we’ve also seen a steady increase in the number of borrowers with tappable equity in their homes, meaning they have current combined loan-to-value (CLTV) ratios of less than 80%.
There are now some 39 million such borrowers, with a total of $4.6 trillion in available, lendable equity. That works out to an average of about $118,000 per borrower, making for the highest market total and highest average per borrower we’ve seen since 2006. Even though the total equity tapped via first lien refinances hit a seven-year high of more than $70 billion over the first three quarters of 2016, that means less than two percent of available equity has been tapped so far this year.
That equity also continues to be accessed safely, with the resulting average post-cash out LTV of 66 percent at near 10-year lows and the average credit score above 750. Much like the negative equity situation, tappable equity is geographically concentrated as well, although in different areas. The top 10 metropolitan areas contain half of all available lendable equity, and California alone accounts for nearly 40 percent, despite having only 16 percent of the nation’s mortgages.”