Despite interest rates rising, origination volume remains stable and a downward trend in delinquencies and foreclosures continues nationwide through July, according to a Mortgage Monitor report released by Lender Processing Services.
Over the last 12 months, the lowest amount of foreclosure starts have been recorded in six years, the Jacksonville, Fla.-based data provider revealed. Also, the firm noted that nearly 50% of these are repeat foreclosures, which is only positive news to help the housing recovery.
Overall, the U.S. loan delinquency rate at the end of July is 6.41%, a month-over-month decrease of 3.96%. LPS said that over one-third of this delinquent market accounts for Alt-A and subprime loans.
LPS found that delinquencies for post-crisis vintage loans (2010-2013) are a fraction of those for pre-crisis loans (2005-2008). Furthermore, early payment defaults for 2013 vintage loans are the fewest on record since 2005, with less than 0.5% total delinquencies at third payment by vintage.
Additionally, LPS examined the delinquency rate for what are likely to be HARP-related loans 12 months after origination. While delinquencies were higher for these HARP prepayments, which have LTV of 100% or more than “traditional,” or sub-80% LTV for government-sponsored enterprise loans, this HARP group is performing better than both pre-crisis GSE loans and post-crisis FHA loans, which both averaged 4% delinquency rates at 12 months of age.
This indication of robust HARP refinance activity is a further sign that while loan origination volume slowed down slightly from May to June, overall activity remains relatively strong now. According to Herb Blecher, senior vice president of data and analytics at Lender Processing Services, prepayment activity is still largely driving origination volume, which has been the case for some time now.
Through July, prepayment rates are on the same pace as a year ago when rates were at historic lows.
“In fact, they (prepayment rates) are roughly at the same levels as the heights of the mini refinance booms’ in 2010—when interest rates were comparable to where they are today—and in 2009, when rates were even higher,” Blecher stated. “As interest rates continue to climb, we can expect that both prepayments and associated originations will decline.”
