Mortgage Defaults Rise First Time Since Financial Crisis but Refi Surge Likely

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by Mish Shedlock, The Maven:

Defaults are up for the first time since the great financial crisis. But as rates fall, a refi surge will help millions.

  • An estimated 243K borrowers defaulted on first lien mortgages in Q2 2019
  • While the quarter ending on a Sunday certainly played a factor in the rise in defaults, a noticeable overall slowdown in the decline in default activity has been observed.
  • The national default rate rose by 3% compared to Q2 2018, the first such annual rise since the financial crisis (adjusting for the 2017 hurricane season)

Delinquencies

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  • The national delinquency rate fell by 7% in July, offsetting the bulk of June’s calendar-related spike
  • At 3.46%, July 2019’s delinquency rate is the lowest of any July on record (dating back to 2000)
  • Serious delinquencies (all loans 90 or more days delinquent but not in active foreclosure) fell below 445,000 for the first time since June 2006
  • Despite the Q2 year-over-year rise in defaults, overall seriously delinquent inventory (loans 90 or more days past due) is down by 17% from last year due to continued strong cure activity

Refinancing Stats

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  • 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
  • There are now 9.7M refinance candidates in the market.
  • Rates have since fallen to 3.50% near a two-and-a-half year low, resulting in the most refinance incentive in the market since late 2016

Notes

The above Black Knight chart and bullet points contain some unpublished numbers. Those bullet points do not match the link at the top.

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