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Improved Affordability and Falling Delinquencies

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Brandon Farber

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After 16 straight months of declines, falling interest rates helped to improve the national affordability landscape and stem the slowdown as annual home price appreciation rose in July, according to data from Black Knight’s upcoming Mortgage Monitor. Additionally, tappable equity increased for the second quarter in a row in Q2 2019, growing by over $335 billion in Q2 2019 hitting an all-time high of $6.3 trillion.

Tappable equity growth had been slowing in recent quarters due to rising interest rates and slowing home price growth, Black Knight notes, but the Q2 growth rate was slightly above Q1’s. Tappable equity is now at the highest volume ever recorded, and 26% above the mid-2006 peak of $5 trillion.

According to the First Look at July 2019 mortgage data from Black Knight. Prepayment activity jumped 26% from June to its highest level in nearly three years and 58% above this time last year as falling interest rates continue to fuel refinance incentive.

According to the First Look, the national delinquency rate dropped by 7%, offsetting the bulk of June’s 11% spike. At 3.46% of the active mortgage universe, delinquencies are just above the record low reached back in May. It’s also the lowest for any July on record going back to 2000. Both serious delinquencies and active foreclosure inventory fell as well. Black Knight states that serious delinquencies continued to improve, as these loans, 90 or more days past due but not in active foreclosure, dropped by 11,000 in June. Active foreclosures fell by 1,000.

Despite July’s decline, mortgage debt and delinquencies make up a large portion of household debt. According to the Federal Reserve Bank of New York, severely derogatory balances are now half of all delinquencies.

“Although the housing crisis produced a huge increase in severely derogatory mortgages, that effect has dissipated as the foreclosure pipeline has cleared out in even the slowest states,” the Fed states. “Today, auto and especially student loan balances are the interesting components: in the second quarter of this year, the outstanding severely derogatory balance is comprised of 35 percent defaulted student loans, which have grown stunningly since 2012.”

Credit: DSnews


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