Refinanceable population has hit a record high says Black Knight

by Steve Randall09 Sep 2019

Freddie Mac’s report last week that the average 30-year mortgage rate fell to 3.49% meant a significant increase in the ‘refinanceable population’.

The monthly Mortgage Monitor from Black Knight released Monday (9/9) shows that the number of homeowners with a 30-year mortgage who have a rate at least 0.75% above the prevailing rate is 24.5 million.

Of these, those who qualify based on broad-based underwriting criteria (720+ credit score, ≤80% LTV, current on their mortgage payments) totals 11.7 million.

Those who are on rates of 0.75%+ include 80% of active mortgages originated in 2018 including 5 million mortgages that were originated in Q2-Q4 2018 when rates averaged 4.5% or higher, representing 10% of the active mortgage universe and 17% of all refinance candidates.

Servicer retention rates rise
Servicer retention rates in the second quarter of 2019 were boosted by the lower mortgage rates.

“As we’ve reported in the past, retention rates tend to be higher for rate/term refinances than any other type of transaction, and that’s just what we observed as of the end of Q2 2019,” said Black Knight Data & Analytics President Ben Graboske. “Falling rates and an abundance of refinance candidates were primary drivers behind servicers retaining 24% of all refinancing borrowers – the highest such retention rate since late 2017 – and 30% of rate/term borrowers specifically.”

However, Graboske says that in an environment of record-high levels of tappable equity and low interest rates that makes cash-out refinances an affordable option for accessing that equity – servicers are retaining just one in five cash-out borrowers.

“Even though rate-term refis are surging right now, cash-outs still made up some 62% of all refinances in the second quarter. Add to that the fact that borrowers refinancing out of 2012-2017 vintage loans account for nearly half of all refis so far in 2019, nearly 80% were cash-out transactions,” he said. “Savvy lenders and servicers need to go beyond the low- hanging fruit of 2018 vintage loans in order to retain this business – and capture additional market share where others are missing out. The key to success is being able to identify and target these customers through an informed, data-driven growth and retention strategy.”

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