The Data & Analytics division of Black Knight, Inc. (NYSE: BKI) just released its latest Mortgage Monitor Report, based upon the company's mortgage performance, housing and public records datasets. This month, by leveraging its McDash loan-level mortgage performance data in combination with public property records, Black Knight undertook an analysis of mortgage servicer retention rates by looking at consecutive mortgages on a single property before and after a refinance transaction. As Black Knight's Data & Analytics Division President Ben Graboske explained, retention rates -- the share of borrowers who remain with their prior servicer post-refinance -- have reached record lows, creating serious challenges in an ever more competitive marketplace.

"In Q1 2019, fewer than one in five homeowners remained with their prior mortgage servicer after refinancing their first lien," said Graboske. "That is the lowest retention rate we've seen since Black Knight began tracking the metric in 2005. Anyone in this industry can tell you that customer retention is key – not only to success, but to survival. The challenge is that everyone is competing for a piece of a shrinking refinance market, the size of which is incredibly rate-sensitive, and therefore volatile in its make-up. Just a month ago, we were reporting that recent rate reductions had swelled the population of eligible refinance candidates by more than half in a single week after hitting a multi-year low just a few months before. Then, with just a slight increase in the 30-year fixed rate -- less than one-eighth of a point -- 1 million homeowners lost their rate incentive to refinance -- almost 20% of the total eligible market.

"This is critical, because refinances driven by a homeowner seeking to reduce their rate or term have always been servicers' 'bread and butter' when it comes to customer retention. Offering lower rates to qualified existing customers is a good, and relatively simple, way to retain their business. Unfortunately, the market has shifted dramatically away from such rate/term refinances. In fact, nearly 80% of 2018 refinances involved the customer pulling equity out of their home -- and more than two-thirds of those raised their interest rate to do so. Retention battles are no longer won -- or lost -- based on interest rates alone. A simple 'in the money analysis' doesn't provide the insight necessary to retain customers and can't take the place of accurately identifying borrowers who are likely to refinance and offering them the correct product. Rather, understanding equity position -- and the willingness to utilize that equity -- is key to accurately identifying attrition risk and reaching out to retain that business."

Black Knight's Mortgage Monitor report also looked at retention from the perspective of product offerings. For example, in 2018, 72% of FHA/VA borrowers in peak cash-out refi vintages (2012/2013) refinanced into a conventional loan product to pull equity from their home; just 28% ended up with an FHA/VA product. This suggests that borrowers may be looking to shed mortgage insurance while simultaneously taking advantage of equity. An astonishing 93% of those same borrowers raised their interest rate to do so. On the other hand, those with GSE loans tended to remain in GSE products post-refinance; 61% remained, while 32% shifted to loans held in bank portfolios. It could be that rising home prices are pushing that second segment into non-conforming, jumbo products. It's also worth noting that fewer GSE borrowers, as compared to FHA/VA, are increasing their interest rate in order to tap equity.

With interest rates for 30-year mortgages declining, Millennials moved quickly to close their mortgages in March 2019. According to the latest Ellie Mae Millennial Tracker, the average 30-year note rate dipped to 4.75%, down from 4.85% in February, and the lowest percentage since April 2018. At the same time, average time to close for all loans dropped to 40 days, marking the shortest closing period since February 2015.

Overall, Millennials closed all loans two days faster month-over-month and the trend was consistent for both refinances and purchases. On average, refinances took 42 days to close in March, 11 days faster than the month prior, while time to close a purchase shrunk from 45 to 39 days.

The decrease in interest rates on all 30-year loans was driven in large part by month-over-month interest changes for 30-year conventional loans, which on average decreased from 4.81% to 4.7%, and VA loans, which fell from 4.47% to 4.36%. FHA loan average interest rates decreased from 4.85% to 4.84% during the same time period.

“Homebuying tends to pick up in the spring and lower interest rates are intensifying this trend among Millennials,” said Joe Tyrrell, executive vice president of strategy and technology at Ellie Mae. “Likewise, lower interest rates are providing increased purchase power to Millennials, allowing them to participate in a very competitive home buying market.”

The Millennial Tracker data echoes findings from the Ellie Mae March Origination Insight Report, which also found a decrease in time to close and a drop in 30-year note interest rates across loans to all borrowers.

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For all loans closed by Millennials in March 2019, 68% were Conventional and 28% were FHA, while VA and other loans accounted for 2% and 3% respectively. Among FHA loans, purchases increased to 95% in March, up from 89% the month prior. Alternatively, among Conventional loans, share of purchases fell to 85%, down one percentage point from February.

Additional findings from the March 2019 Ellie Mae Millennial Tracker include:

• Average time to close for all VA loans in March 2019 was 48 days, higher than for FHA loans (41 days) and Conventional loans (40 days).
• For all closed loans in March 2019, 87% were purchase loans and 11% were refinance loans.
• The average FICO score for Millennial borrowers on all closed loans in March was 720, down slightly from 723 in February.
• Millennial males were listed as the primary borrower on 60 percent of closed loans in March. Millennial women were listed on 31 percent and the remainder of closed loans did not specify primary borrower gender.

The Consumer Financial Protection Bureau (Bureau) today issued a Notice of Proposed Rulemaking (NPRM), which proposes to raise the coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the Home Mortgage Disclosure Act (HMDA) rules. The NPRM would provide relief to smaller lenders from HMDA’s data reporting requirements, and would clarify partial exemptions from certain HMDA requirements that Congress added in the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The Bureau today also issued an Advance Notice of Proposed Rulemaking (ANPR) seeking information about the costs and benefits of collecting and reporting the data points the 2015 HMDA Rule added to Regulation C and certain preexisting data points that the 2015 HMDA Rule revised. The ANPR also seeks comments about the costs and benefits of requiring that institutions report certain commercial-purpose loans made to a non-natural person and secured by a multifamily dwelling.

“Today’s proposed changes would provide much needed relief to smaller community banks and credit unions while still providing federal regulators and other stakeholders with the information we need under the Home Mortgage Disclosure Act,” said CFPB Director Kathleen L. Kraninger. “The public is encouraged to submit their comments on the proposals, which will be considered by the Bureau before the next step is taken.”

For closed-end mortgage loans, the NPRM proposes two alternatives that would permanently increase the coverage threshold from 25 to either 50 or 100 closed-end mortgage loans. For open-end lines of credit, the NPRM would extend for another two years the current temporary coverage threshold of 500 open-end lines of credit. Once that temporary extension expires, the NPRM would set the open-end threshold permanently at 200 open-end lines of credit.