Mortgage performance was “good news” in 2018 says Black Knight

Mortgages performed well in 2018 with a new analysis of performance showing that delinquencies, serious delinquencies, active foreclosures, and total non-current inventory, were all below their pre-recession averages (2000-2005) for the first time since the financial crisis.

“Across the board, 2018 year-end numbers are good news from a mortgage performance perspective,” said Ben Graboske, president of Black Knight’s Data & Analytics division which published its Mortgage Monitor Report today (Feb. 4).

For example, the figures reveal that 576,000 foreclosures were initiated in 2018, the lowest such annual total in more than 18 years and Graboske says most of these were repeat actions.

“In fact, first-time foreclosures were down 18% from the year before, hitting the lowest point we’ve seen since Black Knight started reporting the metric in 2000. Even repeats – though making up more than 60% of all foreclosures – were down 6% from 2017,” he said.

Both the national foreclosure rate and active foreclosure inventory have fallen below long-term norms; at the current rate of decline, both would reach near-record lows by the end of 2019.

And Foreclosure sales (completions) hit a low of more than 18 years; 2018’s 175,000 foreclosure sales were down 25% from the year prior, and were 40% below their pre-recession average

Refinance spike could be seen this year

Graboske says that the high quality of credit and lower risk in the post-crisis origination market is continuing to improve mortgage performance.

“In addition, the low interest rate environment we’ve enjoyed for so long had – until very recently – resulted in a refinance-heavy blend of originations for years,” he added. “Refis, as a whole, tend to outperform their purchase mortgage counterparts, which has boosted mortgage performance as well.”

As of January 2019, there are 2.9 million homeowners with mortgages who could likely qualify for a refinance under broad-based criteria and reduce the interest rate on their first mortgage by at least 0.75% by doing so, the largest this population has been since January 2018.

Black Knight says that if rates are stable or fall further, there could be an unexpected bump in refinance volumes in early 2019.

Positive performance has also been helped by strong employment and housing markets allowing most homeowners meet their debt obligations, while others who may have faced a default have gained enough equity to be able to sell rather than face foreclosure.

More January stats

Mortgage rates fell again in January to an average below 4.5% for the first time since April 2018.

Total U.S. loan delinquency rate: 3.88%

Month-over-month change in delinquency rate: 4.71%

Total U.S. foreclosure pre-sale inventory rate: 0.52%

Month-over-month change in foreclosure pre-sale inventory rate: 1.19%

States with highest percentage of non-current* loans: MS, LA, AL, WV, AR

States with lowest percentage of non-current* loans: ND, ID, WA, OR, CO

States with highest percentage of seriously delinquent** loans: MS, LA, AL, AR, NC

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.
**Seriously delinquent loans are those past-due 90 days or more.
Totals are extrapolated based on Black Knight’s loan-level database of mortgage assets.