2013 Originations Best Performing Vintage on Record
Mortgage originations are at the lowest levels in almost four years, but loans that have recently been distributed are proving to be the best-performing mortgages on record, according to the November Black Knight Financial Services mortgage monitor report.
Total origination volume for November was approximately 400,000 loans, which is almost half the amount generated a year ago.
The higher interest rate environment continues to bring down refinance activity, in which purchase loans now account for over 50% of total originations. Meanwhile, the Jacksonville, Fla.-based analytic firm, formerly known as Lender Processing Services, expects prepayment/refinance activity to experience another drop in next month’s data.
Also, the nonagency share of the market has increased relative to government-backed loans, with the share nearly doubling to 20% as compared to the 10% mark seen in 2010. Furthermore, nonagency jumbo prime originations were up 75% year-over-year, BKFS said.
Due to rising home prices, the past year has seen a significant uptick in the volume of home equity loans and lines of credit. Total home equity lending is up 70%, while volume on second mortgages has more than doubled and second lien HELOCs increased by approximately 70%.
“Notably, nearly all of these jumbo loans have been originated with no mortgage insurance, which may indicate an increased appetite for risk, as well as an opportunity to expand credit criteria, for originations within the private market,” says Herb Blecher, senior vice president of Black Knight Financial Services’ data and analytics division.
Even with tighter credit standards such as credit scores and loan-to-values being enforced to originate a mortgage, total delinquencies for 2013 loans are at extremely low levels across every product category.
The November data showed that the population of refinancible mortgages has gone down by about 4 million loans since the end of 2012. Now, just 5.9 million loans meet refinance criteria, including loan-to-value ratios of 80% or less, credit scores of 720 or higher, current payment status, and interest rates higher than the prevailing interest rate.
However, if credit standards are loosened slightly like lowering the credit score criteria to 700, this could have a positive effect on the refinancible population by almost 17%, or an additional 1 million loans.