"Before the most recent reductions in the average 30-year mortgage interest rate, approximately six million borrowers met broad-based 'refinancibility' criteria," said Barnes. The criterion includes loan-to-value (LTV) ratios of 80% or below, good credit, non-delinquent loan status and current interest rates high enough that borrowers have an incentive to refinance.
Barnes added that in light of where rates are today, and looking at borrowers with current notes at 4.5 % and above, population that could benefit from refinancing has now swelled to 7.4 million -- almost a 25% increase. “This is a relatively conservative assessment though, as those with current rates of 4.25 to 4.5% could arguably benefit from refinancing as well. That group adds another 1.7 million borrowers to the population.”
The data comes from Black Knight’s latest Mortgage Monitor Report
for September. Using the company's comprehensive first and second lien mortgage databases, and leveraging data from its Home Price Index, the company analyzed the current active mortgage population to investigate both the state of the 'refinancible' population as well as of the nation's current equity situation.
Due in no small part to 28 consecutive months of home price appreciation since 2012, Black Knight’s data showed the share of borrowers with negative equity drop down to just below 8% as of July, down from a level of 33% at the end of 2011, and to its lowest point since 2007.
An additional 8.5% of borrowers are in 'near-negative equity' positions, with less than 10% equity in their homes. However, more than half of all borrowers have 30% or more equity, a level not seen in nearly eight years, according to Barnes.
Additionally,, Black Knight also looked at currently active home equity
lines of credit (HELOCs), and -- based on estimated 10-year draw periods -- found that only 7.74% of active HELOCs had begun amortizing entering 2014.
Through 2018, nearly an additional 80% of HELOCs will end their draw periods, resulting in average payment increases of $262 per month. “The most effective way of avoiding payment shock is to refinance a HELOC into a new loan or line of credit, but nearly 30% of HELOCs set to reset through 2018 are either in negative equity or near negative equity positions, making refinancing problematic,” according to Black Knight.
Recent reductions in the average 30-year mortgage interest rate have expanded the population of borrowers who could benefit from refinancing by nearly 25%, according to Trey Barnes, Black Knight's senior vice president of loan data products.