New Mortgage Lending Drops to Lowest Level in 14 Years

New mortgage lending dropped to its lowest level in at least 14 years by the end of February, according to Black Knight Financial Services’ latest Mortgage Monitor Report

That doesn’t mean people aren’t buying homes, however. Despite decreased monthly mortgage originations, real estate sales have remained relatively steady, according to Herb Blecher, senior vice president of Black Night’s Data and Analytics Division, thanks to a “substantial” number of cash transactions. 

“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,” said Blecher in a statement. “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.”

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Total real estate transactions remained flat on a year-over-year basis, but traditional, non-distressed sales rose nearly 15% from last year as distressed transactions continue to decrease, he noted. 

Credit standards stayed tight with little sign of easing, Blecher said. Only around 30% of 2013 loans were originated for borrowers with credit scores beneath 720, indicating “significant” opportunity to expand mortgage lending, depending on lenders’ appetite for risk.

The Mortgage Monitor Report also considered the impact of the Consumer Financial Protection Bureau’s new rules, implemented in January, and found a “sharp shift” in the timing of foreclosure starts.

“As the CFPB rules dictate that foreclosure cannot begin until after 120 days of delinquency, the data showed foreclosure starts at the 90-day mark have all but ceased, while four-month delinquency starts have risen over 100 percent since December,” says Black Rock. 

Concurrently, foreclosure sales hit their lowest level since 2007 and with fewer loans in the foreclosure process, the numbers will continue to decrease. By the end of February, the total U.S. loan delinquency rate was 5.97%, down 4.87% from January. 

Mississippi, New Jersey, Florida, New York, and Louisiana are the states with the highest percentage of non-current loans, including both foreclosures and delinquencies. Colorado, Montana, Alaska, and North and South Dakota are among the states with the lowest percentage of non-current loans. 

View Black Knight’s February Mortgage Monitor Report. 

Written by Alyssa Gerace

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  • There should be no surprise in those numbers. Most reliable prognosticators expected a high reduction in originations. It will no doubt be mirrored in our dinky part of the industry as well.

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