The data also showed variation in negative equity improvement at the geographic level. In Nevada, where the Black Knight Home Price Index shows home prices still 34 percent below their peak, over 14 percent of borrowers are still underwater on their mortgages, the largest share in the nation. By volume, Florida leads the country with just under 500,000 underwater borrowers. Missouri was the only state to see its underwater population actually rise in 2015, due to falling home prices in the state.
This month, Black Knight also looked at recent refinance originations, finding that so-called “serial refinancers” played a large role in the rise and fall of refinance volumes throughout 2015, driven by interest rate fluctuations. Rate/term refinances from borrowers who had held their prior mortgages for less than two years jumped by 800 percent from Q1 2014 to Q1 2015, as interest rates dropped. Likewise, when rates rose toward the end of the year, this population dropped by nearly 65 percent, resulting in two-thirds of rate/term refinances in Q4 2015, stemming from borrowers who held their prior mortgages for more than four years. In addition, Black Knight found that term reductions have become an increasingly popular part of refinance transactions, with 37 percent of rate/term refinances in Q4 2015, including a term reduction.
These two trends are linked, as term reductions are more popular among loans of a greater age, as those borrowers are understandably more hesitant to restart the clock on their mortgages. Finally, the data showed that $68 billion in equity was extracted via cash-out refinance transactions in 2015 — the most since 2009, and a 53 percent increase over 2014. Cash-out refinance borrowers continue to represent a relatively low risk profile for lenders; the average post-cash-out LTV is 67 percent, with an average credit score of just under 750.
As was reported in Black Knight’s most recent First Look release, other key results include:
Total U.S. loan delinquency rate: 4.45%
Month-over-month change in delinquency rate: -12.57%
Total U.S. foreclosure pre-sale inventory rate: 1.30%
Month-over-month change in foreclosure pre-sale inventory rate: – 0.64%
States with highest percentage of non-current* loans: MS, NJ, LA, NY, ME
States with lowest percentage of non-current* loans: AK, SD, MN, CO, ND
States with highest percentage of seriously delinquent** loans: MS, LA, AL, AR, ME
*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.
**Seriously delinquent loans are those past-due 90 days or more.
Totals are extrapolated based on Black Knight Financial Services’ loan-level database of mortgage assets.