Black Knight: 10% Down Payment Volume at 7-Year High

Black Knight Financial Services, Jacksonville, Fla., said more than 1.5 million borrowers have purchased homes with 10 percent down payments over the past 12 months, the highest such volume in seven years.

The company’s Mortgage Monitor report said the average credit score on high-loan-to-value purchase loans today is 50 points higher than those originated in 2004-2006; among GSE loans, average credit scores are 60 points higher

Black Knight Data & Analytics Executive Vice President Ben Graboske said the growth came from the purchase market. After four years of declines in high loan-to-value lending, 10 percent down payment loans now account for nearly 40 percent of all purchase lending.

“The bulk of the growth has not been among the various three-percent-or-less down payment programs that have been reintroduced in the last few years, but rather in five-to-nine- percent down payment mortgages,” Graboske said. “This segment grew at twice the rate of the overall purchase market in late 2016, whereas lending with down payments of less than five percent grew at about the market average.”

Graboske noted low-down-payment purchase lending today has a much different risk profile than it did back in 2005-2006 during the run-up to the financial crisis. “At that time, half of all low-down-payment purchase originations involved ‘piggyback’ second liens, as opposed to a single high-LTV first lien mortgage,” he said. “It’s also worth noting that while the total share of purchase lending going to borrowers putting less than 10 percent down was relatively similar then to what we see today, today’s low-down-payment mortgage products and secondary risk characteristics are markedly different. In the pre-crisis years, a large proportion of low-down-payment loans were more risky adjustable rate mortgages. In contrast, ARMs are virtually nonexistent today among high-LTV loans.”

Other report data:

–Total U.S. loan delinquency rate: 3.80%

–Month-over-month change in delinquency rate: 0.12%

–Total U.S. foreclosure pre-sale inventory rate: 0.81%

–Month-over-month change in foreclosure pre-sale inventory rate: -2.71%

–States with highest percentage of non-current loans: Mississippi, Louisiana, Alabama, West Virginia, Maine.

–States with lowest percentage of non-current loans: Montana, Oregon, Minnesota, North Dakota, Colorado.

–States with highest percentage of seriously delinquent loans: Mississippi, Louisiana, Alabama, Arkansas, Tennessee.