Black Knight: Purchase Lending at 10-Year High; Refinances at 16-Year Low

Black Knight, Jacksonville, Fla., reported $467 billion in first-lien mortgages in the second quarter, up by 20 percent from the first quarter but down by 16 percent from a year ago.

The company’s monthly Mortgage Monitor report said purchase lending jumped by 57 percent to $321 billion, its highest level since 2007; refinancings fell by 20 percent just 31 percent of all mortgage originations in the second quarter, its lowest level since 2000.

The report said borrowers with credit scores of 720 or higher accounted for 74 percent of second quarter purchase loans, compared to a pre-crisis (2000-2003) average of 47 percent. Sixty-five percent fewer purchase mortgages are going to borrowers with sub-720 credit scores than the pre-crisis average.

Black Knight Data & Analytics Executive Vice President Ben Graboske attributed a number of reasons for the increase in purchase mortgages, including rising home prices, an “all-but-total” absence of second-lien purchases, a shift toward high-dollar/low-risk loans among non-agency lenders and a higher share of cash purchases at the lower end of the market. But he cautioned more stringent credit requirements enacted in the wake of the Great Recession may be hampering purchase lending volumes.

“The number of purchase loans being originated still lags the pre-crisis average by almost 30 percent; while overall purchase origination volumes are strong from a total dollar amount perspective, the market still does not appear to be performing at peak capacity,” Graboske said. “Today, there are 65 percent fewer purchase loans being originated to borrowers with credit scores below 720 than in those years. The lack of credit availability for those borrowers is causing a strong headwind for the purchase market.”

Black Knight also assessed the impact of the recently announced extension of the federal government’s Home Affordable Refinance Program through the end of 2018, noting just 108,000 borrowers that would both meet HARP eligibility requirements and that have at least 75 BPS of interest rate incentive to refinance through the program.

Other key results:

–Total U.S. loan delinquency rate: 3.90%

–Month-over-month change in delinquency rate: 2.82%

–Total U.S. foreclosure pre-sale inventory rate: 0.78%

–Month-over-month change in foreclosure pre-sale inventory rate: -2.96%

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

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

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