‘Tappable’ Equity Hits Record $5.4 Trillion

Black Knight, Jacksonville, Fla., said the nation’s ‘tappable’ equity saw the greatest calendar-year increase in 2017, rising by $735 billion to a record $5.4 trillion.

The company’s monthly Mortgage Monitor report said the $5.4 trillion in total tappable equity is the highest dollar amount on record and 10 percent above the prior 2005 peak. It said 75 percent of all tappable equity is now held by borrowers with rates below the prevailing 30-year rate.

And according to Black Knight, some, but not many, homeowners are taking advantage: the report said an estimated $262 billion in tappable equity was withdrawn in 2017 via cash-out refinances and home equity lines of credit, reaching a new post-recession peak. Howver, Americans tapped a lower percentage of available equity than in 2016, withdrawing less than 1.25 percent of all tappable equity in Q4 2017, a four-year low.

“Americans seem more reserved in tapping their equity than in years past,” said Ben Graboske, Black Knight Data & Analytics Executive Vice President. “However, as interest rates rise, it is likely that we will see the HELOC share of equity withdrawals increase as well.”

The report said 55 percent of equity drawn in the fourth quarter was tapped via HELOCs; Graboske noted while among the lowest such share seen since the housing recovery began, that percentage is likely to rise along with interest rates.

The report said the $2.8 trillion in tappable equity is held by borrowers with credit scores of 760 or higher and first-lien interest rates below today’s prevailing rate, creating a large pocket of low-risk HELOC candidates. Black Knight said the average cash-out refinance borrower in 2017 had an average credit score of 744 and pulled $68,000 in equity with a resulting loan-to-value ratio of 66 percent.

The report said the total U.S. loan delinquency rate fell to 4.30 percent in February, down by 0.21 percent from January. States with the highest percentage of non-current loans were Mississippi, Louisiana, Florida, Alabama and West Virginia; states with the lowest percentage of non-current loans were Colorado, North Dakota, Washington, Oregon and Idaho.