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New Loans Reach Record Levels While Delinquencies Dip

There was good news in Black Knight’s Mortgage Monitor concerning 2016 Fourth Quarter Loan Originations released this week. The report revealed that purchase lending during this period hit its highest level since 2006 at $1.1 trillion. However, this was still 28 percent lower than 2005’s peak volume.  

Another positive fact in the report said that nearly 60 percent of reperforming loans (RPLs) have been reperforming for 24 months or more, as compared to 54 percent one year ago and 34 percent at the end of 2012.

As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, 2016 was the best year for overall mortgage originations since 2007.

“A strong fourth quarter finish to the year pushed total 2016 origination volumes to the highest level seen in nine years,” he said. “We’ve now seen nine consecutive quarters of double-digit purchase origination growth, and growth overall in the purchase market in 21 of the past 22 quarters.”

He said that the $2.1 trillion in first lien mortgages originated throughout the year represented a 17 percent increase over 2015, stemming from a 22 percent jump in refinance lending and a 13 percent increase in purchase loans.

There was some additional good news about loans for refinancing. “The refinance market topped $1 trillion in 2016 as well, driven by a year of historically low rates,” Graboske said. “In fact, in the last quarter of 2016, refinance origination volumes were up 58 percent over 2015 and were the highest of any quarter since Q2 2013.”

However, Graboske does not think this trend will continue. “As we reported in our First Look at January’s mortgage performance data, prepayment speeds, historically a good indicator of refinance activity, fell by 30 percent from December to January. When you couple this with the fact that there are 5.7 million, or nearly 70 percent, fewer refinance candidates in the market entering Q1 2017 than there were entering Q4 2016, it becomes very likely that we will see these numbers decline significantly in the first quarter.”

Other facts included in the report included that (1) Nearly $300 billion in refinance originations in Q4 2016 mark a 58 percent increase over the same period in 2015;  

(2) Four percent of active performing mortgages are reperforming loans (RPLs), meaning they were 120+ days delinquent or in foreclosure at some point in the past; and (3) The average RPL today has been reperforming for 35 months, up from an average of 12 months at the end of 2010.

Other key results include: (1) Total U.S. loan delinquency rate: 4.25 percent; (2) Month-over-month change in delinquency rate: -3.85 percent; (3) Total U.S. foreclosure pre-sale inventory rate: 0.94 percent; (4) Month-over-month change in foreclosure pre-sale inventory rate: -0.46 percent.
The report also revealed (1) States with highest percentage of non-current loans: MS, LA, AL, WV, NJ; (2) States with lowest percentage of non-current loans: ID, MT, MN, CO, ND; and (3) States with highest percentage of seriously delinquent loans: MS, LA, AL, AR, TN.  

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