Black Knight: Prepayments are Falling, Hurricane Effect Lingers

As interest rates rise and refinancing declines, the impact is beginning to manifest in the loan prepayment rate. The single month mortality rate (SSM) followed a 15 percent decline in January with another 9 percent loss in February.  Black Knight says, in its "first look" at February loan performance data, that the SSM during the month was 0.72 percent, the lowest since 2014.

After dropping sharply in the prior month, improvement in the national delinquency rate slowed in February. Black Knight said there was only a 0.21 percent month-over-month decline in the rate of loans 30 or more days past due, but not in foreclosure. Those delinquencies declined by 4,000 to 2.198 million, 4.30 percent of all active mortgages.  Delinquencies were up on an annual basis, rising by 2.10 percent or 63,000 loans.

The company said that the slowing rate of decline in delinquencies was directly attributable to mortgages on properties affected by Hurricane's Harvey and Irma. Those delinquencies had dropped by 17 percent in January but were down only 5 percent in February. 

Serious delinquencies, 90 days or more but not yet in foreclosure, that were attributable to the hurricanes saw an even smaller decline, only a 3 percent.  There are still 128K such seriously delinquent mortgages in Texas, Florida, and Georgia. Nationwide, 697,000 loans meet seriously delinquent criteria, down 10,000 from January and 56,000 over the previous 12 months.

There was a 25 percent decline in foreclosure starts, coming after those starts hit a 12-month high in January.  There were 46,700 foreclosure actions begun during the month, the third lowest total since late 2000 and down 19.34 percent compared to January 2017.

The foreclosure inventory, loans in the process of foreclosure, which had also grown in January, declined by 6,000 loans or 1.81 percent in February and is at a new post-recession low of 331,000 loans. The inventory is 30.30 percent, 139,000 loans, smaller than last February.

Completed foreclosures as a share of seriously delinquent loans and those in the process of foreclosure dropped by 19.68 percent from a post-holiday moratorium spike in January to a rate of 1.40 percent. This is a -24.97 percent annual change.

The state that continues to have the highest percentage of non-current loans, 10.69 percent, is Mississippi. It was followed by Louisiana (9.11 percent), Florida (8.21 percent), Alabama and West Virginia (7.53 and 6.96 percent respectively.) Seriously delinquent loans were highest in Florida, Mississippi, Louisiana, Texas, and Alabama. Those rates ranged from 3.84 percent down to 2.13 percent.

Black Knight says it will provide a more in-depth review of this data in its monthly Mortgage Monitor report, which will be available by April 2, 2018.