Black Knight: As Interest Rates Drop, More Qualify to Refinance

Thanks to the extended refinance boom, everyone who could have refinanced their mortgages have already done so, right?

Think again, says Black Knight Financial Services, Jacksonville, Fla.

Black Knight said mortgage interest rates, which dropped by nearly 30 basis points in the first six weeks of 2016, have given new opportunities to refinance for nearly 1.5 million more households, a 30 percent increase since January. Black Knight now estimates that 6.7 million borrowers could yet refinance, saving an average of $3,000 per year and $20 billion in potential annual savings. Of those borrowers, 3.3 million could save $200/month or more; nearly 1 million could save $400/month or more.

And if rates fall another 15 basis points, Black Knight said the potential refi population jumps to 8.8 million, the largest number of refinanceable borrowers since 2012/2013, when rates were their lowest in history.

“On the other hand, if rates start to rise, these numbers will dissipate quickly; this remains an extremely rate sensitive population,” said Black Knight Data & Analytics Senior Vice President Ben Graboske.

The company’s Mortgage Monitor report also looked at potential risk exposure faced in three states where courts are deliberating the specifics around how statutes of limitations law is applied to foreclosure actions. High-end estimates based solely on loan-level delinquency timelines show that in those states–Florida, New Jersey and New York–up to 98,000 seriously delinquent loans could face some degree of statutes of limitations exposure (mortgages that are more than five years past due in Florida or more than six years past due in New Jersey and New York).

The report said despite a 38 percent reduction over the past 12 months, at 40,000 loans, Florida still has the largest remaining volume of properties with potential statute of limitations exposure. Potential exposure levels in New York and New Jersey have risen over the past 12 months–currently sitting at 35,300 and 22,000 respectively–due to limited resolution in severely delinquent loan populations in both states.

Black Knight said without taking into account additional carrying costs and/or fees incurred by mortgage servicers, it estimates the current potential unpaid principal balance risk exposure in these three states at $30 billion, concentrated primarily in private-label securities. “As it stands today, roughly $1 out of every $10 of principal in private-label securitizations in these three states is tied to a mortgage that is more than five years delinquent in Florida or more than six years delinquent in New York and New Jersey,” the report said.

Other report highlights:
–Total U.S. loan delinquency rate: 5.09 percent, a 6.62 percent increase from December.
–Total U.S. foreclosure pre-sale inventory rate: 1.30 percent, a month over month decrease of 4.53 percent.
–States with highest percentage of non-current loans: Mississippi, Louisiana, New Jersey, Alabama and West Virginia.
–States with lowest percentage of non-current loans: South Dakota, Minnesota, Alaska, Colorado and North Dakota.
–States with highest percentage of seriously delinquent loans: Mississippi, Louisiana, Alabama, Maine and Tennessee.

Black Knight also reported that total 2015 origination reached $1.76 trillion, a 31 percent increase over 2014, equal to a 17 percent increase in purchase originations and a 53 percent increase in refinancings.

However, Black Knight noted the bulk of this activity happened in the middle part of the year, observing a clear deceleration in both purchase & refi originations in the fourth quarter. The 26 percent drop in purchase originations from the third quart to the fourth quarter represented the largest drop of any year since 2008.