A "refi boomlet" that materialized this year was particularly concentrated in a certain group of recent originations, a trend that could resurface as some forecasts
The average borrower getting a rate-and-term refinance had closed their loan 15 months prior, marking the shortest period in almost two decades, according to ICE Mortgage Technology's in-depth analysis of monthly data reported earlier.
More than three-quarters of the rate-and-term refinancing occurred in high-rate 2023-2024 originations. These loans also constituted almost half of all refis during the period studied. The Department of Veterans Affairs guaranteed nearly one-third of the loans involved.
The numbers quantify some trends considered likely given the market's composition and historical patterns, potentially allowing originators and servicers to keep improving preparations for business opportunities and risk management if rates fall again.
With rising interest rates, lenders were less worried about customers refinancing with competitors. Even so, retention rates have improved recently, reaching nearly 40% for new borrowers, according to the Mortgage Monitor report.
Numerically, 300,000 refis closed, representing the most activity recorded in more than two years and a notable jump in rate-and-term activity. Those borrowers saved around $47 million in total or over a percentage point in rate on average.
"For most, this was a no-brainer; on average, these folks cut their first lien rates by more than a point and their monthly mortgage payment by $320 per month," said Andy Walden, ICE vice president of research and analytics, in a press release.
The numbers also bore out anticipation that refinances would tend to have higher loan-to-value ratios given home price patterns, rate buydowns and the availability of programs that allow the financing of closing costs. One out of every 10 rate-and-term refis had LTVs above 100%.
Most of these were VA guaranteed mortgages, which utilize a type of residual income underwriting less reliant on loan-to-value limits and offered more rate savings than other products.
More than one-third of all VA loans undergoing rate-and-term refinancing recently had LTVs over 100%.
Government securitization guarantor
Borrowers with larger loan balances also were particularly prone to refinance in line with historical patterns and the degree of savings available.
Almost 40% of those with loan balances above $750,000 reduced their first-lien mortgage by 75 basis points. Another 12% refinanced to reduce their rates by less than 50 basis points.
It took a 125 basis-point reduction in rates to move borrowers with loans in the $250,000 to $375,000 range to refinance. Those with balances going up as high as $624,000 behaved similarly.
A large mass of loans originated at record-low rates during the pandemic's housing boom remained unmoved as others have refinanced.
The latest Mortgage Monitor also revealed more details of how Hurricanes Milton and Helene have affected loan performance.
Somewhat like refinancing, loan performance issues have ticked up a little recently and are worth studying given they could be
The estimated number of first-lien borrowers that have gone delinquent due to the two hurricanes in between August and October topped 40,000, according to the report.
(The Department of Housing and Urban Development
Borrowers hit by Helene and Milton are in six states: Florida, Georgia, the Carolinas, Tennessee and Virginia. Much of the damage was concentrated in the Sunshine State, with 17,000 of the delinquencies in eight Florida counties. Tampa was the hardest hit area in Florida.
Two regions in the Carolinas contributed 1,000 delinquencies each. Buncombe, the county that contains Asheville, North Carolina, was one. The other was Greenville, South Carolina.
The biggest local jump in the delinquency rate in terms of percentage points was in Glascock County, Georgia, which has a population of less than 3,000 and is located just West of Augusta. Delinquencies increased by 7 percentage points there.
ICE Mortgage Technology also has begun to examine the value at risk from local propensity for events like the two hurricanes defined by the annualized percentage of property loss expected under various standard climate projections.
The vast majority of properties in Florida have annualized value at risk, and in nearly half, the percentage is above 0.25%
VaR is considered an indicator risk is likely, but it isn't necessarily pegged to specific delinquency rates.
