Mortgage Monitor November 2013

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BKFS Mortgage Monitor Mortgage Market Performance Observations

Data as of November, 2013 Month-end

Black Knight Financial Services

Focus 1: Mortgage Performance Update – Delinquencies, Foreclosures and Prepayments

Focus 2: Originations update; Mortgage and HE volumes and characteristics

Focus 3: Remaining risks and upcoming opportunities in the market

Focus Points


DQs following typical seasonal pattern, FCs continue to improve (with reduced holiday activity)

NJ and NY non-current rates are now on par with FL and NV, 2x rates in CA and AZ

Total home retention actions are down, but activity remains strong

Refi activity continues to decline (with rates up another 25 bps as of Jan-14)

Focus Point 1: Mortgage Performance Update


DQs following typical seasonal pattern, FCs continue to improve

Average Delinquent 1995 to 2005 – 4.33%

Down 42% from Oct-11 Peak


Non-current %: NJ and NY now on par with FL and NV, 2x rates in CA and AZ


Foreclosure activity declined with the onset of the holiday season


Total home retention actions are down, but activity remains strong

Data from the OCC’s Q3 2013 Mortgage Metrics Report

More HAMP trials were initiated in Q2 and Q3 2013 than the prior

three quarters combined


Refi activity continues to decline (with rates up another 25 bps as of Jan-14)


Originations are at the lowest levels since early 2010 with purchases over 50% of total

Non-agency participation has increased relative to government

2013 originations are the best performing vintage on record

Second lien prevalence is still low in recent vintages but HE originations are on the rise

Focus Point 2: Originations update


Originations are at the lowest levels since early 2010

Refi activity indicates another drop coming in

November


Purchase share of originations is now above 50%


Non-agency participation has increased relative to government

Non-agency originations were ~20% of total in Aug and Sep

vs. 10% in 2010 (Jumbo Prime up 75% Y/Y)


2013 originations are the best performing vintage on record

Performance has improved significantly even in the

lowest risk cohorts


Few 2013 jumbo originations carry Mortgage Insurance


Second lien prevalence is still much lower in recent vintages


Home equity originations are up significantly vs. a year ago

100% = unchanged vs. last year


The “refinancible” loan universe continues to decline, but there is opportunity if risk appetite increases

Higher rates and home prices may lead to more HE opportunity

New problem loans continue to improve; risk from pre-crisis hybrids remains low

Risk of HELOC payment shock with the onset of amortization is high

Focus Point 3: Risks and Opportunities


~4M fewer loans are “refinancible” today vs. Dec 2012

5.9M Loans are “In the Money” and Current

Lowering Credit Score criteria to 700 adds an additional 1M Loans


Higher rates and home prices may lead to more HE opportunity

0%

10%

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50%

60%

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2000 2002 2004 2006 2008 2010 2012

Vintage

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At Origination

By 2017, if recent

vintages follow

the pattern of the

2003 vintage.


New problem loans continue to improve, though judicial states lag


Hybrid ARM reset risk is relatively low

Indices would need to rise over 200 bps for most pre-crisis

hybrid borrowers to experience rate increases, though ~1/3 are

still interest-only


Risk of HELOC payment shock with the onset of amortization is high


New problems are emerging with HELOCs that have begun to amortize


BKFS Mortgage Monitor Appendix

Data as of November, 2013 Month-end


November 2013 Data Summary


Seven of the top 10 states for total non-current are judicial


Loan counts and average days delinquent


BKFS Mortgage Monitor

Disclosures: Product / Metric Definitions and July 2012 Market Sizing Revisions


Disclosure Page: Product Definitions

*Conforming limits do not account for temporary or high-cost area increases.


Disclosure Page: Metrics Definitions

Total Active Count: All active loans as of month-end including loans in any state of delinquency or foreclosure. Post-sale loans and loans in REO are excluded from the total active count.

Delinquency Statuses (30, 60, 90+, etc): All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquent.

90 Day Defaults: Loans that were less than 90 days delinquent in the prior month and were 90 days delinquent, but not in foreclosure, in the current month.

Foreclosure Inventory: The servicer has referred the loan to an attorney for foreclosure. Loans remain in foreclosure inventory from referral to sale.

Foreclosure Starts – Any active loan that was not in foreclosure in the prior month that moves into foreclosure inventory in the current month.

Non-Current: Loans in any stage of delinquency or foreclosure. Foreclosure Sale / New REO: Any loan that was in foreclosure in the prior month that

moves into post-sale status or is flagged as a foreclosure liquidation. REO: The loan is in post-sale foreclosure status. Listing status is not a consideration,

this includes all properties on and off the market. Deterioration Ratio: The ratio of the percentage of loans deteriorating in delinquency

status vs. those improving.


With the June 2012 month-end data, we have updated our extrapolation methodology to incorporate, among other things, improved estimates of market size, which includes higher coverage of government and subprime products and increases our estimate of the total first lien residential mortgage market by three percent to 50.4 million. To ensure consistency in trend analysis, the new methodology has been applied to all historical data and previously reported mortgage performance statistics have been adjusted accordingly. The following section contains information on market coverage and comparisons with previously reported statistics. Additional information is available upon request.


The new scaling increases overall estimated industry loan count by approximately 1.2 million loans

Prior industry estimates declined because scaling didn’t support current servicing transfer volumes


New scaling reflects the higher coverage of government loans and allows for the incorporation of new servicers


Delinquencies decline based on higher

estimated coverage of FHA and subprime loans.

Converge due to new servicers and transfer issues with prior scaling


Foreclosure inventory remains almost identical, but shifts up in recent months as transfer bias is repaired


Foreclosure starts remain consistent, with rates shifting up slightly


Performance Statistics Changes: Database Counts


Performance Statistics Changes: State Level Detail

Date post:	30-May-2015
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Mortgage Monitor November 2013

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