Prepayment activity hit its highest levels since 2016 while delinquencies recovered from their June spike, according to the First Look at July 2019 mortgage data from Black Knight. Prepayment activity jumped 26% from June to its highest level in nearly three years and 58% above this time last year as falling interest rates continue to fuel refinance incentive.
According to the First Look, the national delinquency rate dropped by 7%, offsetting the bulk of June’s 11% spike. At 3.46% of the active mortgage universe, delinquencies are just above the record low reached back in May. It’s also the lowest for any July on record going back to 2000. Both serious delinquencies and active foreclosure inventory fell as well. Black Knight states that serious delinquencies continued to improve, as these loans, 90 or more days past due but not in active foreclosure, dropped by 11,000 in June. Active foreclosures fell by 1,000.
Despite July’s decline, mortgage debt and delinquencies make up a large portion of household debt. According to the Federal Reserve Bank of New York, severely derogatory balances are now half of all delinquencies.
“Although the housing crisis produced a huge increase in severely derogatory mortgages, that effect has dissipated as the foreclosure pipeline has cleared out in even the slowest states,” the Fed states. “Today, auto and especially student loan balances are the interesting components: in the second quarter of this year, the outstanding severely derogatory balance is comprised of 35 percent defaulted student loans, which have grown stunningly since 2012.”
According to the latest Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York, total household debt increased by $192 billion (1.4%) to $13.86 trillion in the second quarter of 2019. This is the 20th consecutive quarter with an increase the Fed’s Center for Microeconomic Data notes.