Black Knight: Cash-Out Refis Hit Highest Level in 5 Years
Black Knight Financial Services, Jacksonville, Fla., said cash-out mortgage refinancings in August reached their highest level in five years.
The company’s Mortgage Monitor report said cash-out refinances rose by 68 percent from a year ago, as borrowers took advantage of still-low rates and newfound equity in their homes. Still, the report said the numbers were 80 percent below their 2005 peak. Borrowers pulled an average of $67,000 in equity through cash-out refis, matching levels last seen in 2006.
Black Knight Data & Analytics Senior Vice President Ben Graboske said borrowers have been capitalizing on the increased equity available to them. Total equity of mortgage holders has risen by nearly $1 trillion over the past year, while “tappable” equity stands at $4.5 trillion.
“What’s really interesting though, is that even after pulling out that equity, resulting average LTVs are at 68 percent, the lowest level we’ve seen in over 10 years,” Graboske said. “During this same time span, we’ve seen second lien HELOC lending rise, albeit at a lesser rate; that volume is up 40 percent from last year. However, as interest rates rise, we could see an increase in HELOC lending and corresponding slowing in first lien cash-out refis, as borrowers will likely want to hang on to lower rates for their first mortgage while still being able to tap available equity.”
Black Knight said more than 30 percent of cash-out refis occurred in California, followed by Texas at 7 percent. Fewer than 10% of cash-out refis leave the borrower with an LTV above 80 percent, also the lowest in over 10 years. More than one-third of all second-quarter rate/term refinances included term-length reductions, with borrowers saving an average of $136 per month in interest and principal.
The report also noted mortgage servicers’ retention of their customers’ business fell. Servicers are retaining just 26 percent of customers through the refinance process, down from 44 percent in 2011. In New York, servicers have just a 10 percent retention rate.
Black Knight reported the total U.S. loan delinquency rate at 4.83 percent, a month over month increase of 2.47 percent. The total foreclosure pre-sale inventory rate fell to 1.37 percent, a month over month drop of 2.17 percent.
States with the highest percentage of non-current loans were Mississippi, New Jersey, Louisiana, Maine and New York; states with the lowest percentage were Montana, South Dakota, Minnesota, Colorado and North Dakota. States with the highest percentage of seriously delinquent loans were Mississippi, Louisiana, Alabama, Rhode Island and Arkansas.
