More than a decade since the start of the financial crisis, performance metrics reflect a recovery to their long-term, 2000-2005 pre-recession averages, according to the “Mortgage Monitor Report” from Black Knight.
"Across the board, 2018 year-end numbers are good news from a mortgage performance perspective," said Ben Graboske, president of Black Knight's Data & Analytics division. "All four major performance metrics delinquencies, serious delinquencies, active foreclosures and total non-current inventory, ended the year below pre-recession averages for the first time since the financial crisis.”
Just 576,000 foreclosures were initiated throughout the entirety of 2018, an 18-year low, and most of these were repeat actions. In fact, first-time foreclosures were down 18 percent from 2017, the lowest point since Black Knight started reporting the metric in 2000. Even repeats, though making up more than 60 percent of all foreclosures, were down 6 percent from 2017.
The high-credit quality and corresponding lower risk continues to pay dividends in terms of mortgage performance. In addition, the low-interest rate environment resulted in a refinance-heavy blend of originations for years. Refis, as a whole, tend to outperform their purchase mortgage counterparts, which has boosted mortgage performance as well.
“We've had the benefit of strong employment and housing markets, which have helped the vast majority of homeowners meet their debt obligations, while those few who may have faced a possible default have gained enough equity to be able to sell rather than face foreclosure," said Graboske.
As the average interest rate on a 30-year mortgage ticked down again in January, falling below 4.5 percent for the first time since April 2018, Black Knight revisited the impact this change has had on borrowers for whom a refinance might make sense.
The decline in rates has returned the interest rate incentive to refinance to 1 million homeowners, a 50 percent increase in rate or term refinance incentive over the last two months. There are now 2.9 million homeowners with mortgages who could likely qualify for a refinance under broad-based criteria and also reduce the interest rate on their first mortgage by at least 0.75 percent by doing so, the largest this population has been since January 2018.
Even if rates should hold steady, and certainly if they fall further, this could lead to an unexpected bump in refinance volumes in early 2019.
