February 2018 Mortgage Monitor
Tappable Equity Sees Greatest Calendar-Year Rise on Record, Increasing $735 Billion in 2017; HELOC Market Share Poised to Rise
- $5.4 trillion in total tappable equity is the highest dollar amount on record and 10 percent above the prior 2005 peak
- 75 percent of all tappable equity is now held by borrowers with rates below the prevailing 30-year rate
- An estimated $262 billion in tappable equity was withdrawn in 2017 via cash-out refinances and home equity lines of credit (HELOCs), reaching a new post-recession peak
- Americans tapped a lower percentage of available equity than in 2016, withdrawing less than 1.25 percent of all tappable equity in Q4 2017, a four-year low
- 55 percent of equity drawn in Q4 2017 was tapped via home equity lines of credit (HELOCs); while among the lowest such share seen since the housing recovery began, that percentage is likely to rise along with interest rates
- $2.8 trillion in tappable equity is held by borrowers with credit scores of 760 or higher and first-lien interest rates below today’s prevailing rate, creating a large pocket of low-risk HELOC candidates
- The average cash-out refinance borrower in 2017 had an average credit score of 744 and pulled $68,000 in equity with a resulting loan-to-value ratio (LTV) of 66 percent
“As home prices continued their upward trajectory at the national level, the amount of tappable equity available to homeowners with mortgages continued to rise as well,” said Graboske. “Tappable equity rose by $735 billion over the course of 2017, the largest dollar-value calendar year increase on record. At $5.4 trillion, total tappable equity is also the highest on record and 10 percent above the previous, pre-recession peak in 2005. An estimated $262 billion in tappable equity was withdrawn in 2017 via cash-out refinances and home equity lines of credit (HELOCs), also reaching a new post-recession peak. Still, Americans seem more reserved in tapping their equity than in years past, withdrawing less than 1.25 percent of all tappable equity in Q4 2017 – a four-year low. Of that total, 55 percent was tapped via HELOCs, the lowest such share we’ve seen since the housing recovery began. However, as interest rates rise, it is likely that we will see the HELOC share of equity withdrawals increase as well.
“At the start of 2018, some 55 percent of all tappable equity was held by borrowers with first-lien interest rates below the going 30-year rate. Following the nearly 50 basis points rise in interest rates we’ve seen since the start of the year, that share has ballooned to 75 percent. While rising rates tend to dampen utilization of equity in general, the market is poised for a strong shift toward HELOC utilization, as they allow borrowers to take advantage of growing equity while holding on to historically low first-lien interest rates. Sixty-five percent of total tappable equity – approximately $2.8 trillion – is held by borrowers with credit scores of 760 or higher and first-lien interest rates below today’s prevailing rate, which creates a large pocket of low-risk HELOC candidates.”
The data also showed that risk remains relatively low among cash-out refinance originations as well. The average cash-out refinance borrower in 2017 had an average credit score of 744 (down from 750 in 2016) and pulled $68,000 in equity (up from $64,000) with a resulting loan-to-value ratio (LTV) of 66 percent. Approximately 40 percent of remaining cash-out refinance candidates – those borrowers with both tappable equity and current first-lien rates of 4.5 percent or higher – have credit scores above 760. As borrowers with higher credit scores tend to have higher average equity amounts, approximately 50 percent of all tappable equity among borrowers with first-lien rates of 4.5 percent or higher is held by that group.
As was reported in ICE’s most recent First Look news release, other key results include:
-0.21%
States with highest percentage of non-current* loans:
MS, LA, FL, AL, WV
States with lowest percentage of non-current* loans:
*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state
**Seriously delinquent loans are those past-due 90 days or more.
Totals are extrapolated based on ICE’s loan-level database of mortgage assets.
About Mortgage Monitor
The Data & Analytics division of Black Knight manages the nation’s leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the Black Knight HPI and Collateral Analytics’ home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.
Black Knight’s research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.blackknightinc.com/data-reports/
About Black Knight
Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.
Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serving their customers. For more information on Black Knight, please visit www.blackknightinc.com.
About Mortgage Monitor
ICE manages the nation’s leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the ICE Home Price Index and Collateral Analytics’ home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.
ICE’s research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.icemortgagetechnology.com/resources/data-reports
About Intercontinental Exchange
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