Loan Prepayment Activity Highest Since 2005
October 4, 2012
Mortgage repayment rates—a key indicator of refinance activity—increased significantly in August to reach their highest levels since 2005, according to the latest Mortgage Monitor report from Lender Processing Services. In fact, prepayment rates in August rose above those seen in the “mini refinance waves” of both 2009 and 2010, according to LPS. “Our analysis showed an increase in prepayment activity across the entire combined loan-to-value (CLTV) continuum,” said Herb Blecher, LPS Applied Analytics senior vice president. “While those loans with equity, particularly 80 percent CLTV and below, have much higher prepayment speeds, the impact of the Home Affordable Refinance Program (HARP) was also clear. Loans with a CLTV of more than 120 percent saw the greatest uptick – a 65 percent increase for the year to date. However, it is also becoming evident that loans originated in 2007 and earlier have diminished prospects for conventional refinancing opportunities. Fewer than 30 percent of these vintages remain both active and current, and on average, they are marked by larger negative equity positions and lower credit scores. That said, HARP might yet represent a viable refi option for a good portion of this pool.” The report also showed that foreclosure inventory in August remained more than eight times the 1995-2005 pre-crisis period, despite national foreclosure inventory dropping to the lowest point since October 2010. The national foreclosure average masks the stark difference between judicial and non-judicial foreclosure states. In judicial states, foreclosure inventory was at a near-record high of 6.49 percent (despite a 14 percent month-over-month increase in judicial state foreclosure sales), as opposed to 2.28 percent in non-judicial states. Overall, foreclosure sales were up 12 percent nationally in August, but remain 33 percent below their September 2010 peak. Continuing its decline, according to the report, the inventory of loans 90 or more days delinquent is now almost 50 percent off its January 2010 peak. The bulk of the remaining inventory has now been past due for more than nine months, with a full 43 percent past due for 12 months or more. Still, signs of ongoing modification activity remain in late-stage delinquency, with loans six or more months past due—but not yet in foreclosure—showing the greatest increase in cures from the prior month's status. Key Results From Report:
- Total U.S. loan delinquency rate: 6.87%
- Month-over-month change in delinquency rate:-2.30%
- Total U.S. foreclosure pre-sale inventory rate:4.04%
- Month-over-month change in foreclosure pre-sale inventory rate: -1.00 %
- States with highest percentage of non-current* loans: FL, MS, NJ, NV, NY
- States with the lowest percentage of non-current* loans: MT, AK, SD, WY, ND
*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.
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