LPS' August Mortgage Monitor: Interest Rate Hikes Shrinking 'Refinancible'
Population; Home Price Increases Potentially Opening New Home Equity Loan
JACKSONVILLE, Fla., Oct. 7, 2013
JACKSONVILLE, Fla., Oct. 7, 2013 /PRNewswire/ --The August Mortgage Monitor
report released by Lender Processing Services (NYSE: LPS) found that
prepayment activity (historically a good indicator of mortgage refinance
activity) declined sharply in August as mortgage rates continued to rise. In
conjunction with those rate increases, a large portion of borrowers has been
effectively shifted out of the "refinancible" population. However, at the same
time, according to analysis done by LPS, rising home prices and corresponding
levels of equity for many borrowers may translate into opportunity for the
home equity loan and lines of credit market.
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"We have seen prepayments decline by more than 30 percent since May, when
mortgage interest rates began climbing approximately 100 basis points to where
we are today," LPS Senior Vice President Herb Blecher said. "As a result, the
percentage of borrowers currently in loans with interest rates high enough for
refinancing to make fiscal sense has decreased significantly. Over half of
borrowers are now 'out of the money' with respect to refinancing. In December
2012, the population of potentially refinance-eligible borrowers stood at
roughly 10 million. However, refinance activity during that time, along with
rising interest rates, have shrunk that pool to just 5.7 million borrowers as
"While higher interest rates may certainly have the effect of tamping down
refinance activity, they may actually wind up contributing to a new appetite
for home equity loans among homeowners," Blecher continued. "After bottoming
out at the beginning of 2012, home prices are now at their highest levels
since 2009, and borrowers who bought or refinanced within the last few years
are quite likely to have accumulated additional equity in their homes. Based
upon LPS' analysis of historical borrowing patterns and home value trends, it
is possible that we could see an increase in second-lien borrowing among those
who have locked in their first mortgages at very low rates and who wish to tap
their equity without refinancing into a higher rate."
This month's Mortgage Monitor also looked at foreclosure pipelines at both the
national and state levels. Though national pipelines have been steadily
decreasing due to both an increase in foreclosure sales and declining
foreclosure starts, pressure is still growing or extreme in many states. New
York, a judicial state, still has the largest pipeline ratio based on the very
limited volume of current foreclosure sales in that state, but certain
non-judicial states have seen dramatic increases in the wake of passing
foreclosure-related legislation or rulings. California, for example, has seen
its pipeline ratio increase nearly 70 percent since that state's Homeowners
Bill of Rights went into effect at the beginning of this year. Likewise,
Massachusetts has seen an increase of 136 percent (to 168 months) since a Q2
2012 state Supreme Court ruling slowed the process significantly there.
As reported in LPS' First Look release, other key results from LPS' latest
Mortgage Monitor report include:
Total U.S. loan delinquency rate: 6.20%
Month-over-month change in delinquency rate: -3.31%
Total U.S. foreclosure presale inventory rate: 2.66%
Month-over-month change in foreclosure presale inventory -5.74%
States with highest percentage of non-current* loans: FL, MS, NJ, NY, ME
States with the lowest percentage of non-current* loans: MT, CO, WY, SD, ND
*Non-current totals combine foreclosures and delinquencies as a percent of
active loans in that state.
Totals are extrapolated based on LPS Data & Analytics' loan-level database of
To view the Mortgage Monitor Snapshot series, LPS' video version of the
Mortgage Monitor,click here.
About the Mortgage Monitor
LPS manages the nation's leading repository of loan-level residential mortgage
data and performance information on nearly 40 million loans across the
spectrum of credit products. The company's research experts carefully analyze
this data to produce a summary supplemented by dozens of charts and graphs
that reflect trend and point-in-time observations for LPS' monthly Mortgage
Monitor Report. To review the full report, click here.
About Lender Processing Services
LPS (NYSE: LPS) delivers comprehensive technology solutions and services, as
well as powerful data and analytics, to the nation's top mortgage lenders,
servicers and investors. As a proven and trusted partner with deep client
relationships, LPS offers the only end-to-end suite of solutions that provides
major U.S. banks and many federal government agencies the technology and data
needed to support mortgage lending and servicing operations, meet unique
regulatory and compliance requirements and mitigate risk.
These integrated solutions support origination, servicing, portfolio retention
and default servicing. LPS' servicing solutions include MSP, the industry's
leading loan-servicing platform, which is used to service approximately 50
percent of all U.S. mortgages by dollar volume. The company also provides
proprietary data and analytics for the mortgage, real estate and capital
markets industries. Lender Processing Services is a Fortune 1000 company
headquartered in Jacksonville, Fla. For more information, please visit
SOURCE Lender Processing Services, Inc.
Contact: Media contact - Michelle Kersch, (904) 854-5043,
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