Mortgage retention rates recover from slump: Black Knight

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With more rate-and-term refinancing in the mix, home lenders did a better job of retaining borrowers in the second quarter, but there's still room for improvement.

"While losing the business of more than two out of every three rate-driven refinance customers is not exactly extraordinary performance, it is significantly better than the sub-20% retention rates throughout much of 2017," Ben Graboske, president of data and analytics for Black Knight, said in a press release.

The mortgage industry's second-quarter recapture rate jumped to 24% from the first quarter's post-crisis low of 18% and from 19% in the second quarter of 2018.

The retention rate for rate-and-term refinances during the period was 30%, but the retention rate for cash-out refinancing was just 20%.

"The not-so-good news is that — in an environment of record-high levels of tappable equity and low interest rates that make cash-out refinances an affordable option for accessing that equity — servicers are retaining just one in five cash-out borrowers," Graboske said.

The volume of home equity borrowers could tap before their loans would reach a combined loan-to-value ratio of 80% increased to an all-time high of $6.3 trillion during the second quarter.

Within this subset of the market, almost three-fourths of mortgage holders have rates of 3.75% or higher. This means they could withdraw home equity without necessarily having to borrow at higher interest rates, according to Black Knight.

More than half of borrowers with the ability to access home equity have credit scores of 760 or higher. This suggests that the loan performance risk lenders would face if they increased these borrowers' leverage is relatively low.

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