Data released by Fidelity company Black Knight Financial Services last week showed monthly mortgage originations fell last year to their lowest level in 14 years, but sales remained steady despite the decline in the number of new mortgages.
“February’s data showed the continued trend of declining origination activity we’ve been observing since mid-2013, with monthly originations falling to their lowest recorded point since at least 2000,” Herb Blecher, the senior vice president of Black Knight’s data and analytics division, said. “In spite of this decline, residential real estate sales have remained strong due at least in part to investor activity and the fact that cash sales account for almost half of all transactions.”
Though the number of transactions remained flat year-over-year, Blecher said traditional sales increased nearly 15 percent. Credit standards, however, showed few signs of easing, with only approximately 30 percent of all loans in 2013 going to borrowers with credit scores below 720.
Loan modification activity also fell significantly in 2013, falling to near post-crisis lows. Blecher said, however, that new changes to the Federal Housing Administration’s Home Affordable Modification Program caused activity to increase in the first few months of 2014.
“We continue to see that as industry modification efforts have matured, including offering more effective modification types (including HAMP’s interest rate reductions), far fewer borrowers are experiencing re-defaults than in the early years post-crisis,” Blecher said. “Of course, more than 95 percent of the roughly 2.5 million interest rate reduction modifications still face rate resets, with many of these set to begin adjusting this fall. As these are controlled resets, we do not expect drastic changes in monthly mortgage payments at first… We do see that, even after modification, borrower equity continues to play a significant role, with re-default rates approximately 30 percent higher for underwater borrowers.”
Black Knight, a Fidelity National Financial company, provides technology, data and analytics solutions.