First time homebuyers have been increasing their participation in the housing market and their share of new mortgage originations.
But this increase has also contributed to a rise in the number of mortgages that were delinquent within 6 months according to the Mortgage Monitor from Black Knight.
This trend has been noticed over the past 24 months with purchase loans the primary driver.
“About 1% of loans originated in Q1 2019 were delinquent six months after origination. While that’s less than one-third of the 2000-2005 average of 2.95%, it represents a more than 60% increase over the last two years and is the highest it’s been since late 2010,” said Black Knight Data & Analytics President Ben Graboske. “Early-stage GSE delinquencies currently stand at 0.6%, up two tenths of a percentage point over the past 24 months, but still 40% below the market average and 60% below their own 2000-2005 average of 1.3%.”
Graboske added that although there has been some softening in GSE purchase loan performance, it hasn’t been to the extent seen among entry-level buyers.
“All in all, first-time homebuyer originations combined between the GSEs and GNMA increased by nearly 50% between 2014 and 2018. However, whereas first-time homebuyers represent just over 40% of GSE purchase loans, they make up 70% of the GNMA purchase market,” he said.
That concentration is contributing to a more significant increase in early-stage delinquencies among GNMA loans, which saw 3.3% of loans delinquent six months after origination, up 1.2 percentage points from two years ago.
“Though still roughly half the 2000-2005 pre-crisis average, it represents the sharpest increase we’ve seen in the market in recent years,” Graboske noted. “However, performance among repeat purchasers with GNMA-securitized loans has remained relatively steady overall, with the rise more pronounced among first-time homebuyers. Rising debt-to-income ratios due to tight affordability and declining first-time homebuyer credit scores stand out as likely drivers here.”
Refinance population dipped
Black Knight’s Mortgage Monitor also reveals that last week’s rise in the average 30-year mortgage to 3.78% (up 3 basis points week-over-week) according to Freddie, has cut the population of refinance candidates down to 6.8M.
That’s a 30% drop from September’s monthly average of 9.7M, and 42% below the all-time high of 11.7M (see at the start of September). However, the refi-able population is still nearly 60% larger than this time last year.
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