Black Knight – May Mortgage Monitor: underwater
borrower population below two million for first time
since 2006
– The number of underwater borrowers declined by 16%
in the first three months of 2017
– 350,000 borrowers regained equity in Q1 2017,
bringing the total underwater population down to 1.8
million
– The underwater population has fallen by nearly one
million borrowers since last year, a 35% annual decline
– Nearly half of remaining underwater borrowers live
in the bottom 20% of homes by price in their markets
– Tappable equity has risen by $695 billion from last
year, bringing total lendable equity to just under $5
trillion
– Over 40 million Americans have tappable equity
available in their homes today; the largest population
on record
The Data and Analytics division of Black Knight
Financial Services, Inc. released its latest Mortgage
Monitor Report, based on data as of the end of May
2017. This month, Black Knight finds that rising home
prices have both decreased the number of borrowers
underwater on their mortgages while increasing the
amount of tappable – or lendable – equity available to
homeowners. As Black Knight Data & Analytics Executive
Vice President Ben Graboske explained, continued growth
in the equity landscape has also improved the net worth
of many – but not all – homeowners with mortgages.
“The steady upward trajectory of home prices continues
to improve the equity positions of many homeowners,”
said Graboske. “This is plainly visible in the number
of borrowers who are underwater on their mortgages,
owing more than their homes are worth. Over the past
year, we&rs quo;ve seen a 35% decline in the total underwater
population, with a 16% decline in that population over
the first three months of 2017 alone. Home prices rose
2.3% in the first quarter, as compared to 1.8% over the
same period last year, helping an additional 350,000
borrowers regain equity in their homes. As of today,
there are 1.8 million underwater borrowers remaining,
the first time this population has fallen below two
million since 2006. “What stands out is the disparity
we see in this improvement. As has been the case for
some time now, negative equity has become more and more
a localized phenomenon. But it’s also becoming
concentrated among a particular class of homeowner.
Nearly half of all borrowers who remain underwater own
homes in the lowest 20% of prices in their respective
markets. While the nation as a whole now has a negative
equity rate of just 3.6%, among owners in that lowest
price tier, it’s over eight%. In fact, these
lowest-price-tier properties are more than twice as
likely to be underwater as those in the next price tier
up, and 6.5 times more likely to be underwater than
those living in the top 20% of the market. This is the
highest differential we’ve seen between high and low
price tiers since we began keeping track in 2005. In
some areas, the disparity between the lowest price tier
and the highest is staggering. In Detroit, for example,
borrowers whose homes are in the lowest 20% of prices
are 50 times more likely to be underwater than those in
the top 20%.”
Rising home prices are also increasing the amount of
equity available for homeowners to borrow against.
Looking solely at borrowers with at least 20% equity in
their homes, Black Knight found that total tappable (or
lendable) equity increased by $695 billion dollars over
the last year. “Over 40 million Americans with a
mortgage now have tappable equity available in their
homes,” Graboske continued. “This is the largest this
population has ever been. Growth over the last year
brought the total lendable equity market to just under
$5 trillion as of the end of Q1 2017. If home prices
continue to rise at or near their current rate of
appreciation, tappable equity will likely hit record
highs by this summer. Though nearly half of the
country’s 100 largest metropolitan areas have already
reached record levels of tappable equity, as a whole
these areas remain geographically con centrated. The
majority are found in more coastal areas, specifically
in large city centers. In fact, more than half of the
nation’s tappable equity lies in the 10 largest metro
areas. California alone contains nearly 40% of
available equity. While the growth in tappable equity
is obviously good news for both homeowners and lenders
alike, it does represent some risk as well. Investors
in mortgages and mortgage servicing rights – as well as
others with a stake in the broader mortgage market –
need to be prepared to account for a higher share of
equity-driven prepayment risk, as well as an increased
chance of borrowers adding on second liens that primary
loan servicers and investors may not be aware of.” As
was reported in Black Knight’s most recent First Look
release, other key results include:
– Total US loan delinquency rate: 3.79%
– Month-over-month change in delinquency rate: -7.13%
– Total US foreclosure pre-sale inventory rate: 0.83%
– Month-over-month change in foreclosure pre-sale
inventory rate: -2.97%
– States with highest percentage of non-current loans:
MS, LA, AL, WV, ME
– States with the lowest percentage of non-current*
loans: OR, ID, MN, ND, CO
– States with highest percentage of seriously
delinquent loans:MS, LA, AL, AR, TN
Amazon is quietly rolling out its own Geek Squad to set
up gadgets in your home
For 15 years, Best Buy’s Geek Squad installation and
repair service has served as one key advantage over
Amazon that the e-commerce giant seemed unlikely to
match.But over the last few months, Amazon has quietly
been hiring an army of in-house gadget experts to offer
free Alexa consultations as well as product
installations for a fee inside customer homes, multiple
sources told Recode, and job postings confirm. The new
offering, which has already rolled out in seven markets
without much fanfare, is aimed at helping customers set
up a “smart home” — the industry term used to describe
household systems like heating and lighting that can be
controlled via apps, and increasingly by voice. While
Amazon has a marketplace for third parties to offer
home services like TV mounting and plumbing, these new
smart-hom e-related services seem important enough to
Amazon that it is hiring its own in-house experts. And
perhaps for good reason. Smart-home gadgets make up one
of the fastest-growing segments of the consumer
electronics industry, but they can be difficult to set
up and integrate with each other. That hurdle has led
to higher-than-normal return rates, experts say, so
Amazon is likely looking at the in-home services as one
way to lower that number. Perhaps more importantly,
controlling the smart home by voice is one of the most
promising use cases for Alexa, the virtual assistant
built into the Echo line of gadgets, which Amazon is
betting heavily on. So it’s not totally surprising that
Amazon would make the effort to close the education gap
for these products by sending its own hires into
customer homes. An Amazon spokesman declined to
comment. Amazon is charging $99 for installation
services like setting up an Ecobee4 Alexa-enabled smart
thermostat, though some services are discounted by 20%
this week. Multi-device set-ups that take more than an
hour may cost more. In eligible cities, shoppers can
book the installations during the checkout process.
New York City’s ‘Billionaire’s Row’ is dead — and a
record-breaking foreclosure could be the ‘nail in the
coffin’
A full-floor penthouse in the landmark One57 condo
building is headed to the auction block after it was
seized under foreclosure, Bloomberg reported. This is
most likely the largest foreclosure in the history of
high-end real estate in New York City, experts say. “I
don’t know of a foreclosure that’s larger than that,”
Donna Olshan, president of Olshan Realty, told
Bloomberg. The apartment, which was the eighth-priciest
sold in the building, will go to auction on July 19. It
was purchased for $50.9 million in 2014, with a $35.3
million mortgage loan from Banque Havilland. It was due
to be paid in full a year after purchase, but no such
payment was made by the shell company the unit was
registered under. Havilland is now forcing the auction
to recoup the funds it’s missing , plus interest,
according to court filings. One57 is emblematic of New
York City’s Billionaire’s Row, a stretch of 57th Street
near Central Park, which in recent years has become a
magnet for new condos courting high-priced investment.
One57 is considered the most expensive of the new
buildings, with record-breaking sales that included a
$100.5 million top-floor penthouse. This is the second
apartment in the building to face foreclosure in the
last two months. A unit on the 56th floor, which sold
for $21.4 million in July 2015, hit the auction block
on June 14. It’s unclear if the property has changed
hands yet.
Oil pares losses, but rising supply a worry
Oil dipped on Monday, paring some earlier losses
triggered by rising drilling activity in the United
States and no let-up in supply growth from both OPEC
and non-OPEC exporters, but the outlook remained
gloomy. Brent crude futures were last down 11 cents on
the day at $46.60 a barrel by 1430 GMT, while US crude
futures were last down 13 cents at $44.10 a barrel.
“The market is in trouble and looks very vulnerable to
lower numbers,” PVM brokerage said in a note. The
Organization of the Petroleum Exporting Countries has
agreed with some non-OPEC members to curtail production
until March 2018 but the move has failed to eliminate a
global glut of crude. Several key OPEC ministers will
meet non-OPEC Russia on July 24 in St Petersburg,
Russia, to discuss the situation in oil markets. Kuwait
said on Sunday that Nigeria and Libya had been invited
to the meeting and their production could be capped
earlier than November, when OPEC is scheduled to hold
formal talks, according to Bloomberg. Libya said on
Monday it was ready for dialog but added that its
political, economic and humanitarian situation should
be taken into account in talks on caps. Brent prices
are 17% below their 2017 opening despite strong
compliance by OPEC with the production-cutting accord.