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JANUARY 2020 REPORT

MORTGAGE MONITOR

https://www.blackknightinc.com/data-reports/?report-type=mortgage-monitor&report-year=2018

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Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, and/or an affiliate. © 2020 Black Knight Financial Technology Solutions, LLC. All Rights Reserved.

MORTGAGE MONITOR

JANUARY 2020 | 2Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, and/or an affiliate. © 2020 Black Knight Financial Technology Solutions, LLC. All Rights Reserved.

Each month, the Black Knight Mortgage Monitor looks at a variety of issues related to the mortgage finance and housing industries.

This month, as always, we begin with a review of some of the high-level mortgage performance statistics reported in our most recent First Look report, with an update on delinquency, foreclosure and prepayment trends. Next, we take a deeper dive into select January performance highlights, with a focus on record-low delinquencies, prepayment activity and refinance incentive in today’s low interest rate market.

Next, we revisit the state of the nation’s equity landscape as of Q4 2019, including a geographical breakdown of where equity is growing most strongly. We also dig into Q4 refinance origination metrics to get a sense of who exactly is tapping that equity. Finally, in light of the surge of rate-driven and cash-out refinance activity we’ve seen in recent months, we check back on servicer retention rates to get a sense of how well the industry is recapturing the business of refinancing borrowers.

In producing the Mortgage Monitor, Black Knight’s Data & Analytics division aggregates, analyzes and reports upon the most recently available data from the company’s vast mortgage and housing related data assets. Information is gathered from the McDash loan-level mortgage performance dataset, the Black Knight HPI and the company’s robust public property records database covering 99.9% of the U.S. population. For more information on gaining access to Black Knight’s data assets, please call 844-474-2537 or email [email protected].

JANUARY 2020 OVERVIEW

MORTGAGE MONITOR

JANUARY FIRST LOOK RELEASE

JANUARY PERFORMANCE HIGHLIGHTS

Q4 2019 EQUITY UPDATE

SERVICER RETENTION RATES

APPENDIX

DISCLOSURES

DEFINITIONS

3

4

10

12

17

20

21

CONTENTS




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MORTGAGE MONITOR

JANUARY 2020 | 3

Here we have an overview of findings from Black Knight’s ‘First Look’ at January mortgage performance data. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

JANUARY 2020 FIRST LOOK RELEASE

January continued and improved upon December’s strong reduction in the national delinquency rate, which fell by more than 5% for the month to hit its lowest recorded level since Black Knight began tracking the data in 2000.

JANUARY OVERVIEW STATS

CHANGE IN DELINQUENCY RATE

Mortgage delinquencies hit their lowest level on record, dating back

to 2000

January’s 14%+ year-over-year decline was the strongest in more

than 12 months

NON-CURRENT RATE

The number of non-current loans (30+ days past due or in active foreclosure) fell below 2M for the first time since 2005

Falling nearly 14% year-over-year to 1.95M, non-current inventory is also

the lowest it’s been since March 2005

FORECLOSURE STARTS

Foreclosure starts edged up in January, but remain nearly 15%

below last year’s levels

The number of loans in active foreclosure remained relatively flat for the month and

were down 19K year-over-year

8.35%-4.68%-5.37%



https://www.blackknightinc.com/black-knights-first-look-at-January-2020-mortgage-data/


https://www.blackknightinc.com/wp-content/uploads/2020/02/BKI_MM_Jan2020_Chart01.pdf




MORTGAGE MONITOR

JANUARY 2020 | 4

Here, we take a deeper dive into select January performance highlights, with a focus on record-low delinquencies, prepayment activity and refinance incentive in today’s low interest rate market. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

JANUARY 2020 PERFORMANCE HIGHLIGHTS

» Mortgage delinquencies fell by 5.4% month-over month to the lowest level on record since Black Knight began reporting the metric in 2000

» At 3.22%, the national delinquency rate is down 14% from the same time last year

» With annual declines picking up in recent months and tax refund season on the horizon, we could see delinquencies push downward even further

» Historically speaking, delinquencies tend to fall in each of the first three months of the year, with the largest declines typically coming in March

» January’s decline was nearly twice the 20-year average seen for the month

» Delinquencies are now more than 1.5 percentage points below the 4.74% pre-crisis (2000-2005) seasonal average for the month of January

4.74%

3.22%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

2000

-01

2001

-01

2002

-01

2003

-01

2004

-01

2005

-01

2006

-01

2007

-01

2008

-01

2009

-01

2010

-01

2011

-01

2012

-01

2013

-01

2014

-01

2015

-01

2016

-01

2017

-01

2018

-01

2019

-01

2020

-01

NATIONAL DELINQUENCY RATE – FIRST LIEN MORTGAGESDelinquency Rate 2000-2005 Average Record Low

NATIONAL DELINQUENCY RATE – FIRST LIEN MORTGAGES

-2.9% -2.2%

-10.6%

+3.2%

+0.7%

+2.9%

+0.6%

-0.2%

+5.1%

-2.1%

+4.4%

+1.6%

-14%

-9%

-4%

1%

6%

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

July

Aug

ust

Sep

tem

ber

Oct

ober

Nov

embe

r

Dec

embe

r

AVERAGE MONTHLY CHANGE IN DELINQUENCY RATE(SINCE JANUARY 2000)

AVERAGE MONTHLY CHANGE IN DELINQUENCY RATE(SINCE JANUARY 2000)







MORTGAGE MONITOR

JANUARY 2020 | 5


» Both purchase mortgages and the market as a whole began to see increased early-stage delinquencies as interest rates rose throughout 2018

» Falling 30-year rates throughout 2019 helped ease affordability pressures and reduce average debt-to-income (DTI) ratios among purchase originations

» In the 12 months ending July 2019, an average 1.15% of purchase loans were delinquent after six months

» Overall early-stage refinance delinquency rates held steady at just under 1% through Q2/early-Q3 after rising steadily for much of the previous two years

» While early-stage delinquency rates among rate/term refinances have held relatively steady, those of cash-out refinances have pulled back slightly, as falling rates decrease the pay shock of first lien equity withdrawal

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

201101

201107

201201

201207

201301

201307

201401

201407

201501

201507

201601

201607

201701

201707

201801

201807

201901

201907

FHLM

C 30-

Year

Fix

ed In

tere

st R

ate

Delin

quen

cy R

ate

6 M

onth

s Af

ter

Orig

inat

ion

Origination Month

DELINQUENCY RATE AT 6 MONTHS AFTER ORIGINATION(12 MONTH MOVING AVERAGE)

Average 30-Year Interest Rate Purchase Rate/Term Refi Cash-Out Refi Total MarketWith rates continuing to fall, the rise in early-stage purchase loan delinquencies has begun to slow

DELINQUENCY RATE AT 6 MONTHS AFTER ORIGINATION(12 MONTH MOVING AVERAGE)





MORTGAGE MONITOR

JANUARY 2020 | 6

» Overall prepayment activity fell by 15.3% in January, despite refinance incentive holding steady for the final eight weeks of 2019

» The decline was uniform across most investor classes, with GSE, GNMA, and portfolio prepayments falling by 15-17% from December

» Prepays among legacy PLS loans fell 8% month-over-month, not unexpected given that these mortgages tend to be less reactive to interest rate movements

» Refinance-related prepayments accounted for 2/3 of the monthly decline, with rate/term prepayments falling by 14% month-over-month and cash-out-related prepays down 19% from December

» A seasonal decline in home sales accounted for the other 1/3 of the decline, with housing turnover prepays falling 22% month-over-month

» If historical trends hold true, housing turnover-related prepays should hold relatively steady through February before picking up noticeably in the peak home buying/selling season

» Rising refi incentive in recent weeks could also put upward pressure on prepayment speeds in coming months

29 20 18 14 17 17 17 21 18 25 21 18 16 12 11 9 9 7 7 8 6 7 5 6 9 15 17 24 35 29 49 56

69 83

63 62 53

28 23 24 21 24 24 23

28 25 30

28 26 24 21 23 21 21 19 19 20 17 19 15 16 15 16 19

22 25

23

29 34

37

45

37 38 31 26

25 39

39 51 56 49

51 40

41 36

35 26 26

38 42 50 55 51 50 36 39

34 32 23 24

35 41

50 50

52 48

38

41

35 36

28 7

7

9 7

8 8 7

7

8

10 8

9 8

8 10 8

8 9 8 11

8 9

8 8 8

8

9

9

10 8

9 9

8

9

9 10

11

6 6

6 6

6 6 5

6

5

6 5

5 4

4

5 5 5 6 4 5

4 4

3 4 3

3

4

4

3 3

3 3 3

3

2 3

3

-

20

40

60

80

100

120

140

160

180

20170

1

20170

2

20170

3

20170

4

20170

5

20170

6

20170

7

20170

8

20170

9

20171

0

20171

1

20171

2

20180

1

20180

2

20180

3

20180

4

20180

5

20180

6

20180

7

20180

8

20180

9

20181

0

20181

1

20181

2

20190

1

20190

2

20190

3

20190

4

20190

5

20190

6

20190

7

20190

8

20190

9

20191

0

20191

1

20191

2

20200

1

Pre

paym

ent R

ate

(SM

M) i

n B

PS

PREPAY ACTIVITY (SMM) BY CAUSE OF PREPAYMENT(36-MONTH DETAILED BREAKDOWN)

Rate/Term Refi Cash-out Refi Sale of Home Curtailment Default

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2008

-01

2009

-01

2010

-01

2011

-01

2012

-01

2013

-01

2014

-01

2015

-01

2016

-01

2017

-01

2018

-01

2019

-01

2020

-01

PREPAYMENT RATE (SMM) BY INVESTOR / PRODUCTGSE FHA/VA Portfolio Private Securities Total Market

PREPAYMENT RATE (SMM) BY INVESTOR / PRODUCT PREPAY ACTIVITY (SMM) BY CAUSE OF PREPAYMENT(36-MONTH DETAILED BREAKDOWN)







MORTGAGE MONITOR

JANUARY 2020 | 7

» Sub-3.5% mortgage interest rates have increased refinance incentive noticeably in recent weeks

» Black Knight defines refinance candidates as 30-year mortgage holders who are current on their loans, have credit scores of 720 or higher, hold at least 20% equity in their homes, and who could cut their current interest rate by at least 0.75% via a refi

» The population of potential candidates jumped from fewer than 8M in mid-January to as many as 11.3M by early February, a 40% increase in just four weeks

» 11.1M candidates remained as of February 20th, representing an aggregate $2.95B per month in potential savings, setting the stage for an increase in both refinance and prepayment activity in March

» While 2018 vintage borrowers make up the largest volume of refinance candidates (1.67M), there are currently nine vintages with 500K or more refinance candidates

» Disregarding our LTV and credit score assumptions, which are conservative by design, there are 21.8M homeowners with current interest rates at least 0.75% above today's prevailing rate in the market today

834,000

341,000

395,000

287,000

279,000

203,000

686,000

821,000

723,000

452,000

617,000 916,000

590,000

406,000

1,017,000

1,665,000

899,000

<2004

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

DISTRIBUTION OF REFINANCE CANDIDATES BY VINTAGE

.0M

2.0M

4.0M

6.0M

8.0M

10.0M

12.0M

14.0M

3.00%

3.20%

3.40%

3.60%

3.80%

4.00%

4.20%

4.40%

4.60%

03.Jan 07.Feb 14.Mar 18.Apr 23.May 27.Jun 01.Aug 05.Sep 10.Oct 14.Nov 19.Dec 23.Jan 27.Feb

REFINANCE CANDIDATES BY WEEK VS. 30-YEAR FIXED RATESRefi Candidates (Right Axis) 30-Year Fixed Rate Freddie PMMS (Left Axis)

REFINANCE CANDIDATES BY WEEK VS. 30-YEAR FIXED RATES DISTRIBUTION OF REFINANCE CANDIDATES BY VINTAGE







MORTGAGE MONITOR

JANUARY 2020 | 8


» Should recent downward pressure on the 10-year U.S. treasury yields translate into further declines in the average 30-year rate, we could see refinance incentive hit a record high

» If rates fall to 3.375%, nearly 13M homeowners could likely both qualify for and benefit from a refinance

19.4

M

17.2

M

14.5

M

12.8

M

11.1

M

9.2M

7.7M

6.4M

5.4M

4.5M

3.5M

3.0M

2.7M

2.3M

2.0M

1.7M

1.6M

1.4M

1.1M

1.0M

.9M

3.00

0%

3.12

5%

3.25

0%

3.37

5%

3.50

0%

3.62

5%

3.75

0%

3.87

5%

4.00

0%

4.12

5%

4.25

0%

4.37

5%

4.50

0%

4.62

5%

4.75

0%

4.87

5%

5.00

0%

5.12

5%

5.25

0%

5.37

5%

5.50

0%

NUMBER OF REFINANCE CANDIDATES UNDER DIFFERENT 30-YEAR FIXED RATE SCENARIOS

(BASED ON FIRST LIEN MARKET MAKE-UP AS OF JANUARY 2020)The population of refinance candidates remains extremely sensitive to even the slightest rate movements

NUMBER OF REFINANCE CANDIDATES UNDER DIFFERENT 30-YEAR FIXED RATE SCENARIOS

(BASED ON FIRST LIEN MARKET MAKE-UP AS OF JANUARY 2020)





MORTGAGE MONITOR

JANUARY 2020 | 9

Here, we revisit the state of the nation’s equity landscape as of Q4 2019, including a geographical breakdown of where equity is growing most strongly. We also dig into Q4 refinance origination metrics to get a sense of how that equity is being tapped. This information has been compiled from the Black Knight Home Price Index and the company’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

JANUARY 2020 Q4 2019 EQUITY UPDATE

» Tappable equity – the amount available for homeowners with mortgages to borrow against before reaching a maximum combined LTV of 80% – eased seasonally in Q4 2019

» Still, at $6.2T, tappable equity marked its highest year-end total on record

» The same falling interest rates that have reheated the housing market have also increased the rate of equity growth for the third consecutive quarter

» Tappable equity grew 9.0% year-over-year in Q4 2019, the highest such growth rate since Q3 2018

» There are currently 44.7M homeowners with equity available to tap via cash-out refinance or home equity line of credit (HELOC)

» The average homeowner holds $119K in tappable equity, up $8400 from the same time last year

» Total debt on mortgaged U.S. residential properties is equivalent to 52% of the associated homes' values; up slightly from a trough of 51.4% in the summer of 2019, but down from 53% one year ago

+16.5%

+9.0%

+0.0%

+5.0%

+10.0%

+15.0%

+20.0%

+25.0%

2016-09

2016-12

2017-03

2017-06

2017-09

2017-12

2018-03

2018-06

2018-09

2018-12

2019-03

2019-06

2019-09

2019-12

ANNUAL GROWTH RATE OF TAPPABLE EQUITY

$4,285

$4,914

$4,627

$3,755

$2,830

$2,603

$2,370

$2,234

$2,557

$3,123

$3,557

$4,122

$4,690

$5,425

$5,806

$6,061

$5,943

$5,714

$5,982

$6,317

$6,238

$6,227

$

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2004-12

2005-12

2006-12

2007-12

2008-12

2009-12

2010-12

2011-12

2012-12

2013-12

2014-12

2015-12

2016-12

2017-12

2018-03

2018-06

2018-09

2018-12

2019-03

2019-06

2019-09

2019-12

Tapp

able

Equ

ity in

$Bi

llion

s

TAPPABLE EQUITY OF U.S. MORTGAGE HOLDERS

Tappable Equity: Equity available on all residential properties with an existing mortgage before reaching a current CLTV of 80%

ANNUAL GROWTH RATE OF TAPPABLE EQUITYTAPPABLE EQUITY OF U.S. MORTGAGE HOLDERS

Tappable Equity: Equity available on all residential properties with an existing mortgage before reaching a current CLTV of 80%







MORTGAGE MONITOR

JANUARY 2020 | 10


» Tappable equity increased year-over-year in all 100 of the nation's largest markets in Q4 2019

» San Jose, where equity fell 7% year-over-year in Q3, has begun to level out, with equity increasing by a modest 1% from Q4 2018

» Some of the largest annual increases were in Midwest and Northeast markets

» Tappable equity in Buffalo, NY; Cincinnati, OH; Columbus, OH; and Memphis, TN all saw greater than 20% increases

» Some of the nation's once-hottest housing markets, saw tappable equity increase less than 5% including San Jose, Houston, Denver, Dallas and San Francisco

» Still, the West Coast remains equity-rich, with California holding 36% of the country’s total tappable equity

» Los Angeles, San Francisco, and San Jose rank first, second and fourth, respectively, in terms of markets with the highest equity

» Nearly 50% of the nation's total tappable equity is held within the 10 most equity-rich markets

TAPPABLE EQUITY BY CBSA – Q4 2019GREEN = MARKETS WHERE TAPPABLE EQUITY HAS DECLINED OVER PAST 12 MONTHS

$523B

$427B

$195B

$190B

$126B

$821B

$277B

$95B

$113B

$129B

$192B$142B

$110B

TAPPABLE EQUITY BY CBSA – Q4 2019GREEN = MARKETS WHERE TAPPABLE EQUITY HAS DECLINED OVER PAST 12 MONTHS

$129B

$142B

$173B

$190B

$192B

$195B

$277B

$427B

$523B

$821B

$B $200B $400B $600B $800B

Los Angeles, CA

San Francisco, CA

San Jose, CA

Washington, DC

Chicago, IL

Seattle, WA

San Diego, CA

Boston, MA

Dallas, TX

TAPPABLE EQUITY COMPARISON BY CBSA(TOP 10 CBSAs BY TAPPABLE EQUITY VOLUME)

2019-Q4 2018-Q4

New York-Newark, NY-NJ

Tappable Equity: Equity available on all residential properties with an existing mortgage before reaching a current CLTV of 80%Tappable Equity: Equity available on all residential properties with an existing mortgage before reaching a current CLTV of 80%

$B $200B $400B $600B $800B

$129B

$142B

$173B

$190B

$192B

$195B

$277B

$427B

$523B

$821BLos Angeles, CA

San Francisco, CA

Washington, DC

Chicago, IL

Seattle, WA

San Diego, CA

Boston, MA

Dallas, TX

San Jose, CA

New York-Newark, NY-NJ

TAPPABLE EQUITY COMPARISON BY CBSA(TOP 10 CBSAs BY TAPPABLE EQUITY VOLUME)

2019-Q4 2018-Q4

$145B

$166B

$190B

$194B

$211B

$262B

$287B

$340B

$347B

$2,248B

$B $500B $1,000B $1,500B $2,000B $2,500B

Virginia

Massachusetts

New Jersey

Illinois

Colorado

Washington

New York

Texas

Florida

California

TAPPABLE EQUITY COMPARISON BY STATE(TOP 10 STATES BY TAPPABLE EQUITY VOLUME)

2019-Q4 2018-Q4

$145B

$166B

$190B

$194B

$211B

$262B

$287B

$340B

$347B

$2,248BCalifornia

Florida

Washington

Colorado

Illinois

New Jersey

Massachusetts

Virginia

New York

Texas

TAPPABLE EQUITY COMPARISON BY STATE(TOP 10 STATES BY TAPPABLE EQUITY VOLUME)

$B $500B $1,000B $1,500B $2,000B $2,500B







MORTGAGE MONITOR

JANUARY 2020 | 11

» Approximately 75% of homeowners with tappable equity have current interest rates at or above the prevailing 30-year rate, making the utilization of that equity potentially more attractive

» The average opening rate on a HELOC in Q4 2019 was 6.2%, a full 2.5% higher than the average 30-year rate reported by FHLMC for the quarter of 3.7%

» Further, 30-year rates are currently a full 20BPS lower than their Q4 average, potentially widening that gap and sustaining the headwinds facing the HELOC market throughout 2019

» Given the distribution of equity holders and current rate offerings, it's likely that homeowners looking to utilize their home equity will continue to lean on cash-out refi products in early 2020

6.21%

3.7%

2.51%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2012

-1

2012

-2

2012

-3

2012

-4

2013

-1

2013

-2

2013

-3

2013

-4

2014

-1

2014

-2

2014

-3

2014

-4

2015

-1

2015

-2

2015

-3

2015

-4

2016

-1

2016

-2

2016

-3

2016

-4

2017

-1

2017

-2

2017

-3

2017

-4

2018

-1

2018

-2

2018

-3

2018

-4

2019

-1

2019

-2

2019

-3

2019

-4

Origination Quarter

AVERAGE INTEREST RATE AT ORIGINATION2nd Lien HELOC 30-YR Fixed Rate (FHLMC) Delta Between 30-YR and HELOC

Source: Freddie Mac PMMS; McDash Home Equity Database

$0B

$200B

$400B

$600B

$800B

$1,000B

$1,200B

Below 3%

3.00-3.24%

3.25-3.49%

3.50-3.74%

3.75-3.99%

4.00-4.24%

4.25-4.49%

4.50-4.74%

4.75-4.99%

5.00-5.24%

5.25-5.49%

5.50-5.74%

5.75-5.99%

6.00-6.24%

6.25-6.49%

6.50-6.74%

6.75-6.99%

7%andAbo

ve

DISTRIBUTION OF TAPPABLE EQUITY(BY FIRST LIEN INTEREST RATE)

More than 75% of Tappable Equity Holders have current interest rates of 3.5% of higher

DISTRIBUTION OF TAPPABLE EQUITY(BY FIRST LIEN INTEREST RATE)

AVERAGE INTEREST RATE AT ORIGINATION

Source: Freddie Mac PMMS; McDash Home Equity Database

More than 75% of Tappable Equity Holders have current interest rates of 3.5% or higher







MORTGAGE MONITOR

JANUARY 2020 | 12

» After hitting an 18-year low in Q4 2018, refinance lending rose 250% year-over-year to hit a 6.5-year high in Q4 2019

» While rate/term refinance activity drove the bulk of the increase, growing equity and falling rates also pushed cash-out refinance lending to a more than 10-year high

» Approximately 600K homeowners pulled $41 billion in equity via cash-outs in Q4, the largest such volume since mid-2009

» With rates falling below 3.5% in early 2020, cash-out refinance activity is likely to remain strong in coming months

» Cash-out origination volumes have increased in each of the past three quarters

» However, outsized growth in rate/term lending has suppressed the cash-out share of refinance lending, which edged below 50% in Q4 2019 for the first time in three years

$B

$20B

$40B

$60B

$80B

$100B

$120B

2005

-Q2

2005

-Q4

2006

-Q2

2006

-Q4

2007

-Q2

2007

-Q4

2008

-Q2

2008

-Q4

2009

-Q2

2009

-Q4

2010

-Q2

2010

-Q4

2011

-Q2

2011

-Q4

2012

-Q2

2012

-Q4

2013

-Q2

2013

-Q4

2014

-Q2

2014

-Q4

2015

-Q2

2015

-Q4

2016

-Q2

2016

-Q4

2017

-Q2

2017

-Q4

2018

-Q2

2018

-Q4

2019

-Q2

2019

-Q4

Firs

t Lie

n Re

finan

ce O

rigin

atio

ns in

Mill

ions

EQUITY WITHDRAWN VIA CASH-OUT REFINANCE(INCLUDES 2ND MORTGAGE AND HELOC CONSOLIDATION)

82%

49%

0%

20%

40%

60%

80%

100%

0.0

0.5

1.0

1.5

2.0

2005

-Q2

2005

-Q3

2005

-Q4

2006

-Q1

2006

-Q2

2006

-Q3

2006

-Q4

2007

-Q1

2007

-Q2

2007

-Q3

2007

-Q4

2008

-Q1

2008

-Q2

2008

-Q3

2008

-Q4

2009

-Q1

2009

-Q2

2009

-Q3

2009

-Q4

2010

-Q1

2010

-Q2

2010

-Q3

2010

-Q4

2011

-Q1

2011

-Q2

2011

-Q3

2011

-Q4

2012

-Q1

2012

-Q2

2012

-Q3

2012

-Q4

2013

-Q1

2013

-Q2

2013

-Q3

2013

-Q4

2014

-Q1

2014

-Q2

2014

-Q3

2014

-Q4

2015

-Q1

2015

-Q2

2015

-Q3

2015

-Q4

2016

-Q1

2016

-Q2

2016

-Q3

2016

-Q4

2017

-Q1

2017

-Q2

2017

-Q3

2017

-Q4

2018

-Q1

2018

-Q2

2018

-Q3

2018

-Q4

2019

-Q1

2019

-Q2

2019

-Q3

2019

-Q4

Cash

-out

Sha

re o

f Firs

t Lie

n Re

fis (B

y Co

unt)

Firs

t Lie

n Re

finan

ce O

rigin

atio

ns in

Mill

ions

FIRST LIEN REFINANCE ACTIVITYCash-out Refi Originations (Left Axis) Rate/Term Refi Originations Cash-out Share of First Lien Refis (Right Axis)

EQUITY WITHDRAWN VIA CASH-OUT REFINANCE(INCLUDES 2ND MORTGAGE AND HELOC CONSOLIDATION)

FIRST LIEN REFINANCE ACTIVITY







MORTGAGE MONITOR

JANUARY 2020 | 13

» While cash-out refinances collectively increased by 13% from 2018 to 2019, they actually declined by a collective 13% among homeowners who bought or last refinanced in 2013 or prior

» At the same time, cash-outs increased by 85% among homeowners who took out their mortgages in 2014 or later

» The most pronounced increases were seen among homeowners who had previously taken out their mortgage in 2016, 2017 or 2018 refis of which were up by 58%, 138%, and 1700% respectively

» The limited (or, indeed, negative) growth in cash-outs among homeowners who purchased at or near the bottom of the housing market in 2011-2013 is particularly interesting, given they’ve seen the greatest equity growth in recent years

8K 18K36K 33K

16K 9K40K 39K 33K 45K 36K 22K 31K 38K 33K 33K12K

26K 22K

32K24K

27K20K

57K85K 92K

159K140K

92K112K

121K 121K97K

8K

9K

14K

14K

13K

21K22K 20K

25K

-

50,000

100,000

150,000

200,000

250,000

2002

& P

rior

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

BREAKDOWN OF 2019 CASH-OUT REFINANCES (BY PRIOR LOAN INVESTORY AND VINTAGE)

Private/Other GNMA GSE Portfolio

11K 23K48K 40K

18K 10K40K 43K 36K 45K 36K

21K 23K 22K 14K21K

41K 34K

48K38K

47K30K

63K90K 101K

143K141K

86K 87K 77K

50K

10K

11K

14K18K

12K 19K15K

-

50,000

100,000

150,000

200,000

250,000

2002

& Pr

ior

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

BREAKDOWN OF 2018 CASH-OUT REFINANCES (BY PRIOR LOAN INVESTORY AND VINTAGE)

Private/Other GNMA GSE Portfolio

BREAKDOWN OF 2018 CASH-OUT REFINANCES(BY PRIOR LOAN INVESTORY AND VINTAGE)

BREAKDOWN OF 2019 CASH-OUT REFINANCES(BY PRIOR LOAN INVESTORY AND VINTAGE)







MORTGAGE MONITOR

JANUARY 2020 | 14

» In Q4 2019, approximately 76% of homeowners were either able to keep their interest rate the same or, in many cases, significantly decrease their interest rate through cash-out refinance, the largest such share since Q4 2016

» This includes 50% who decreased their interest rate by at least 0.50% and 25% who decreased their rate by 1% or more

» Such improvements in rates may be contributing to slight declines in early-stage delinquencies of cash-out refinancers

» For comparison, a year ago, when 30-year rates were at or above 4.75%, fewer than 1/3 of cash-out refinancers saw rate improvements through refinancing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Shar

e of

All

Cash

-out

Ref

inan

ce O

rigin

atio

ns

Origination Quarter

RATE INCREASE/DECREASE ON CASH-OUT REFINANCESRate Increase Down 0%-0.49% Down 0.50%-0.99% Down 1.00%-1.49% Down 1.5%+ As interest rates fell throughout 2019, an

increasing share of homeowners reduced their interest rates as part of the cash-out transaction, helping to offset some of the cost of borrowing against their equity

RATE INCREASE/DECREASE ON CASH-OUT REFINANCES






MORTGAGE MONITOR

JANUARY 2020 | 15

» Despite a surge in refinance lending driven by low rates, servicers continue to struggle to recapture refinancing borrowers, with only one in five being retained by servicers in Q4 2019

» Retention rates among cash-out refinances fell from 19% in Q3 to only 17% in Q4, the lowest in more than four years

» Fewer than one in four borrowers refinancing to lower their rate or term – business which has been historically easier to retain – stayed with their servicer post-refinance in Q4

17%

24%20%

0%

10%

20%

30%

40%

50%

60%

70%

2005

-Q4

2006

-Q1

2006

-Q2

2006

-Q3

2006

-Q4

2007

-Q1

2007

-Q2

2007

-Q3

2007

-Q4

2008

-Q1

2008

-Q2

2008

-Q3

2008

-Q4

2009

-Q1

2009

-Q2

2009

-Q3

2009

-Q4

2010

-Q1

2010

-Q2

2010

-Q3

2010

-Q4

2011

-Q1

2011

-Q2

2011

-Q3

2011

-Q4

2012

-Q1

2012

-Q2

2012

-Q3

2012

-Q4

2013

-Q1

2013

-Q2

2013

-Q3

2013

-Q4

2014

-Q1

2014

-Q2

2014

-Q3

2014

-Q4

2015

-Q1

2015

-Q2

2015

-Q3

2015

-Q4

2016

-Q1

2016

-Q2

2016

-Q3

2016

-Q4

2017

-Q1

2017

-Q2

2017

-Q3

2017

-Q4

2018

-Q1

2018

-Q2

2018

-Q3

2018

-Q4

2019

-Q1

2019

-Q2

2019

-Q3

2019

-Q4

SERVICER RETENTION RATE OF REFINANCE TRANSACTIONSCash-out Refinances Rate/Term Refinances All Refinance Retention rates rose along with refinance

volumes early last year, hitting an 18-month high in Q2 2019, but have since fallen in each of the past two quarters

SERVICER RETENTION RATE OF REFINANCE TRANSACTIONS

Here, in light of the surge of rate-driven and cash-out refinance activity we’ve seen in recent months, we check back on servicer retention rates to get a sense of how well the industry is recapturing the business of refinancing borrowers. This information has been compiled from Black Knight’s McDash loan-level mortgage performance database. You may click on each chart to see its contents in high-resolution.

JANUARY 2020 SERVICER RETENTION RATES






MORTGAGE MONITOR

JANUARY 2020 | 16


» Much of early-2019's improvement in rate/term retention rates was driven by the strong retention - and a growing share - of 2018 vintage borrowers

» As 30-year rates began to fall in early 2019, homeowners who took out their mortgages in 2018, when rates were at 7-year highs, flocked to the market to refinance into lower rates

» By Q2 2019, 2018 vintage borrowers made up nearly 25% of all refinances and over half of all rate/term transactions

» Having recently worked with these homeowners, servicers did a far better job of generating repeat business, retaining some 38% of 2018 vintage borrowers refinancing in Q2 2019

» By Q4 though, 2018 vintage mortgage-holders made up a lesser share of refinance originations, more time had passed since their original transactions, and retention of those borrowers fell to 29% by Q4

» If we exclude 2018 vintage refinances, retention has actually slightly improved in recent quarters among other vintages, although it remains muted compared to that of 2018 vintage loans

0%

10%

20%

30%

40%

50%

60%

2018

-Q1

2018

-Q2

2018

-Q3

2018

-Q4

2019

-Q1

2019

-Q2

2019

-Q3

2019

-Q4

BORROWERS REFINANCING OUT OF 2018 VINTAGE LOANSShare of Rate/Term Refis Share of All Refis Retention Rate

21%24%

0%

10%

20%

30%

40%

50%

60%

70%

2005

-Q2

2005

-Q4

2006

-Q2

2006

-Q4

2007

-Q2

2007

-Q4

2008

-Q2

2008

-Q4

2009

-Q2

2009

-Q4

2010

-Q2

2010

-Q4

2011

-Q2

2011

-Q4

2012

-Q2

2012

-Q4

2013

-Q2

2013

-Q4

2014

-Q2

2014

-Q4

2015

-Q2

2015

-Q4

2016

-Q2

2016

-Q4

2017

-Q2

2017

-Q4

2018

-Q2

2018

-Q4

2019

-Q2

2019

-Q4

SERVICER RETENTION RATE OF RATE/TERM REFINANCES Excluding 2018 Vintage All Vintages

SERVICER RETENTION RATE OF RATE/TERM REFINANCES BORROWERS REFINANCING OUT OF 2018 VINTAGE LOANS






MORTGAGE MONITOR

JANUARY 2020 | 17


» Comparing interest rates received by retained borrowers to those received by borrowers lost to the market can provide further retention insights

» Looking at refinances up through Q4 2019, results suggest that interest rate pricing may also be a factor in recent retention challenges

» In the above example, we’ve narrowed the scope to borrowers with 720+ credit scores securing 30-year fixed rate, GSE, rate/term refinances; although a similar expansion can also be seen when reviewing the market as a whole

» On average, borrowers who left for ‘greener pastures’ received a 0.08% lower interest rate than those that were retained

» This was an increase from the 0.01% better rate that defecting borrowers were receiving at the same time last year

» While the interest rate deltas between retained and lost borrowers remain modest, they certainly serve to demonstrate the need for tools to ensure rate pricing is as competitive as possible

-0.30%

-0.25%

-0.20%

-0.15%

-0.10%

-0.05%

0.00%

0.05%

0.10%

2005

-Q2

2005

-Q3

2005

-Q4

2006

-Q1

2006

-Q2

2006

-Q3

2006

-Q4

2007

-Q1

2007

-Q2

2007

-Q3

2007

-Q4

2008

-Q1

2008

-Q2

2008

-Q3

2008

-Q4

2009

-Q1

2009

-Q2

2009

-Q3

2009

-Q4

2010

-Q1

2010

-Q2

2010

-Q3

2010

-Q4

2011

-Q1

2011

-Q2

2011

-Q3

2011

-Q4

2012

-Q1

2012

-Q2

2012

-Q3

2012

-Q4

2013

-Q1

2013

-Q2

2013

-Q3

2013

-Q4

2014

-Q1

2014

-Q2

2014

-Q3

2014

-Q4

2015

-Q1

2015

-Q2

2015

-Q3

2015

-Q4

2016

-Q1

2016

-Q2

2016

-Q3

2016

-Q4

2017

-Q1

2017

-Q2

2017

-Q3

2017

-Q4

2018

-Q1

2018

-Q2

2018

-Q3

2018

-Q4

2019

-Q1

2019

-Q2

2019

-Q3

2019

-Q4

INTEREST RATE DELTA BETWEEN RETAINED AND LOST LOANS(FUTURE LOAN = GSE, 30 YEAR FIXED, RATE/TERM REFI, 720+ CREDIT SCORE)

0.02

0.025

0.03

0.035

0.04

0.045

0.05

0.055

0.06

0.065

0.07

2005

-Q2

2005

-Q4

2006

-Q2

2006

-Q4

2007

-Q2

2007

-Q4

2008

-Q2

2008

-Q4

2009

-Q2

2009

-Q4

2010

-Q2

2010

-Q4

2011

-Q2

2011

-Q4

2012

-Q2

2012

-Q4

2013

-Q2

2013

-Q4

2014

-Q2

2014

-Q4

2015

-Q2

2015

-Q4

2016

-Q2

2016

-Q4

2017

-Q2

2017

-Q4

2018

-Q2

2018

-Q4

2019

-Q2

2019

-Q4

AVERAGE INTEREST RATE POST-REFINANCE(FUTURE LOAN = GSE, 30 YEAR FIXED, RATE/TERM REFI, 720+ CREDIT SCORE)

Retained in Portfolio Lost to Market

AVERAGE INTEREST RATE POST-REFINANCE(FUTURE LOAN = GSE, 30 YEAR FIXED, RATE/TERM REFI, 720+ CREDIT SCORE)

INTEREST RATE DELTA BETWEEN RETAINED AND LOST LOANS(FUTURE LOAN = GSE, 30 YEAR FIXED, RATE/TERM REFI, 720+ CREDIT SCORE)






MORTGAGE MONITOR

JANUARY 2020 | 18

Jan-20 Monthly Change

YTD Change

Yearly Change

Delinquencies 3.22% -5.37% 0.00% -14.17%

Foreclosure 0.46% 0.41% 0.00% -9.24%

Foreclosure Starts 42,800 8.35% 0.00% -14.74%

Seriously Delinquent (90+) or in Foreclosure 1.25% -1.11% 0.00% -15.38%

New Originations (data as of Dec-19) 763K 8.0% 0.0% 69.2%

Jan-20 Dec-19 Nov-19 Oct-19 Sep-19 Aug-19 Jul-19 Jun-19 May-19 Apr-19 Mar-19 Feb-19 Jan-19

Delinquencies 3.22% 3.40% 3.53% 3.39% 3.53% 3.45% 3.46% 3.73% 3.36% 3.47% 3.65% 3.89% 3.75%

Foreclosure 0.46% 0.46% 0.47% 0.48% 0.48% 0.48% 0.49% 0.50% 0.49% 0.50% 0.51% 0.51% 0.51%

Foreclosure Starts 42,800 39,500 33,500 43,900 39,400 36,200 39,200 40,100 39,000 41,400 39,700 40,400 50,200

Seriously Delinquent (90+) or in Foreclosure 1.25% 1.27% 1.30% 1.31% 1.32% 1.33% 1.34% 1.37% 1.37% 1.40% 1.45% 1.47% 1.48%

New Originations 763K 706K 824K 765K 760K 722K 660K 681K 600K 519K 418K 384K

3.75

%

3.89

%

3.65

%

3.47

%

3.36

%

3.73

%

3.46

%

3.45

%

3.53

%

3.39

%

3.53

%

3.40

%

3.22

%

Jan-1

9

Feb-19

Mar-19

Apr-19

May-19

Jun-1

9Ju

l-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-2

0

TOTAL DELINQUENCIES

384K

418K 51

9K 600K 68

1K

660K

722K

760K

765K

824K

706K

763K

Jan-1

9

Feb-19

Mar-19

Apr-19

May-19

Jun-1

9Ju

l-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

NEW ORIGINATIONS

JANUARY 2020 DATA SUMMARY

JANUARY 2020 APPENDIX





MORTGAGE MONITOR

JANUARY 2020 | 19

Month TOTAL ACTIVE COUNT 30 DAYS 60 DAYS 90+ DAYS FC Total NC FC Starts Average Days

Delinquent for 90+Average Days

Delinquent for FCRatio of 90+ to

FC

1/31/05 47,706,128 1,197,062 339,920 458,719 276,745 2,272,446 50,922 242 324 165.8%1/31/06 50,900,620 1,242,434 387,907 542,378 258,613 2,431,332 76,477 207 308 209.7%1/31/07 53,900,458 1,425,030 468,441 551,439 393,973 2,838,883 117,419 203 267 140.0%1/31/08 55,478,782 1,743,420 676,266 950,639 813,560 4,183,885 195,033 190 256 116.8%1/31/09 55,788,441 2,001,314 932,436 1,878,981 1,321,029 6,133,760 250,621 193 323 142.2%1/31/10 55,098,009 1,945,589 903,778 2,972,983 2,068,572 7,890,922 292,308 253 418 143.7%1/31/11 53,861,778 1,750,601 746,634 2,078,130 2,245,250 6,820,615 277,374 333 527 92.6%1/31/12 52,687,781 1,592,463 652,524 1,796,698 2,205,818 6,247,503 223,394 395 666 81.5%1/31/13 51,229,692 1,464,583 587,661 1,551,415 1,742,689 5,346,348 156,654 460 803 89.0%1/31/14 50,380,779 1,341,074 529,524 1,278,955 1,213,046 4,362,599 97,467 486 935 105.4%1/31/15 50,412,744 1,238,453 465,849 1,060,002 884,901 3,649,204 93,280 509 1,031 119.8%1/31/16 50,754,010 1,300,564 444,962 832,265 660,056 3,237,847 72,021 494 1,047 126.1%1/31/17 51,159,681 1,110,977 390,341 665,258 481,613 2,648,190 70,568 454 1,012 138.1%1/31/18 51,428,922 1,085,065 413,313 708,248 337,351 2,543,976 62,470 364 931 209.9%1/31/19 51,896,438 1,074,044 367,750 503,655 264,875 2,210,325 50,196 391 830 190.1%1/31/20 52,999,009 954,154 332,534 418,662 245,517 1,950,866 42,834 338 838 170.5%

LOAN COUNTS AND AVERAGE DAYS DELINQUENT






MORTGAGE MONITOR

JANUARY 2020 | 20

State Del % FC % NC % Year/Year Change in NC% State Del % FC % NC % Year/Year

Change in NC% State Del % FC % NC % Year/Year Change in NC%

National 3.2% 0.5% 3.7% -13.3% National 3.2% 0.5% 3.7% -13.3% National 3.2% 0.5% 3.7% -13.3%MS 9.1% 0.7% 9.8% -2.6% OH* 3.8% 0.7% 4.4% -9.5% NH 2.9% 0.2% 3.2% -13.5%LA* 6.4% 0.8% 7.2% -9.6% KS* 3.7% 0.5% 4.2% -6.2% VA 2.9% 0.2% 3.1% -16.1%AL 5.9% 0.4% 6.3% -7.3% VT* 3.2% 1.0% 4.2% -11.0% AK 2.8% 0.3% 3.0% -9.8%WV 5.5% 0.6% 6.1% -5.0% TN 3.9% 0.2% 4.2% -14.1% NV 2.4% 0.5% 2.9% -13.9%AR 5.3% 0.5% 5.8% -4.2% IL* 3.5% 0.7% 4.1% -17.1% WY 2.5% 0.3% 2.8% -14.4%OK* 4.6% 0.9% 5.4% -1.6% NC 3.7% 0.3% 4.0% -14.8% AZ 2.5% 0.2% 2.7% -8.1%IN* 4.7% 0.7% 5.4% -9.3% NJ* 3.3% 0.6% 3.9% -20.4% SD* 2.2% 0.4% 2.6% -7.4%PA* 4.3% 0.7% 5.0% -8.9% NM* 3.2% 0.7% 3.9% -11.9% MN 2.4% 0.2% 2.6% 2.5%RI 4.2% 0.7% 4.9% -13.7% NE* 3.6% 0.3% 3.9% -1.0% DC 1.8% 0.5% 2.3% -40.9%GA 4.5% 0.3% 4.8% -10.6% IA* 3.3% 0.6% 3.9% -2.8% ND* 1.7% 0.5% 2.2% -10.4%DE* 4.0% 0.7% 4.7% -11.3% FL* 3.2% 0.7% 3.9% -17.7% UT 2.0% 0.1% 2.2% -10.6%SC* 4.1% 0.6% 4.7% -11.4% MO 3.5% 0.3% 3.8% -8.5% MT 1.8% 0.3% 2.1% -13.5%ME* 3.4% 1.2% 4.6% -19.3% KY* 3.3% 0.5% 3.8% -12.3% CA 1.7% 0.2% 1.9% -23.2%TX 4.3% 0.4% 4.6% -7.4% MI 3.3% 0.2% 3.5% -13.1% ID 1.6% 0.2% 1.8% -18.9%MD* 4.0% 0.6% 4.6% -16.1% HI* 2.2% 1.3% 3.5% -19.6% OR 1.5% 0.2% 1.8% -12.7%CT* 3.8% 0.8% 4.6% -17.2% WI* 2.9% 0.4% 3.4% -10.7% WA 1.5% 0.2% 1.7% -22.4%NY* 3.2% 1.4% 4.5% -19.2% MA 2.9% 0.4% 3.4% -15.3% CO 1.5% 0.1% 1.6% -10.4%

*Indicates Judicial State

STATE-BY-STATE RANKINGS BY NON-CURRENT LOAN POPULATION






MORTGAGE MONITOR

JANUARY 2020 | 21

Mortgage Monitor Disclosures

You can reach us by email [email protected]

Follow us on Twitter@Black_KnightInc

JANUARY 2020 DISCLOSURE



http://www.blackknightinc.com/wp-content/uploads/2018/09/BKI_MM-Disclosures.pdf

http://www.blackknightinc.com/wp-content/uploads/2018/09/BKI_MM-Disclosures.pdf

mailto:Mortgage.Monitor%40bkfs.com%20?subject=

https://twitter.com/black_knightinc?lang=en


MORTGAGE MONITOR

JANUARY 2020 | 22

JANUARY 2020 DEFINITIONS

TOTAL ACTIVE COUNT: All active loans as of month-end including loans in any state of delinquency or foreclosure. Post-sale loans and loans in REO are excluded from the total active count.

DELINQUENCY STATUSES (30, 60, 90+, ETC):

All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquent.

90 DAY DEFAULTS: Loans that were less than 90 days delinquent in the prior month and were 90 days delinquent, but not in foreclosure, in the current month.

FORECLOSURE INVENTORY: The servicer has referred the loan to an attorney for foreclosure. Loans remain in foreclosure inventory from referral to sale.

FORECLOSURE STARTS: Any active loan that was not in foreclosure in the prior month that moves into foreclosure inventory in the current month.

NON-CURRENT: Loans in any stage of delinquency or foreclosure.

FORECLOSURE SALE / NEW REO:

Any loan that was in foreclosure in the prior month that moves into post-sale status or is flagged as a foreclosure liquidation.

REO: The loan is in post-sale foreclosure status. Listing status is not a consideration, this includes all properties on and off the market.

DETERIORATION RATIO: The ratio of the percentage of loans deteriorating in delinquency status vs. those improving.



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