The average age of a mortgage loan outstanding in 2014 is the highest in history Black Knight Financial Services said today. While the age of mortgages varies across credit scores, the age of existing loans has been rising steadily and is now at 54 months. Black Knight's Mortgage Monitor report for August shows that the increase in age has been driven by lower credit score groups, particularly those with scores below 650. The chart below shows only a slight increase in loan age among groups with a score above 800 while the rate of increase grows steadily as credit scores decline.
Kostya Gradushy, Black Knight's manager of Research and Analytics said, "In terms of the entire active mortgage population, average loan age has been rising steadily for at least the last nine years. The high volume of originations in 2013 resulted in a temporary slowdown. However, the average loan age since then has hit its highest level ever at 54 months.
Black Knight provides very little analysis to accompany its tables in the Monitor but one would suppose that the dramatically increased age of loans among those with the lowest credit scores are the result of a higher incident of foreclosures and short sales which eliminated many of the loans written in the mid-2000s, hitting hardest at those with less sturdy credit. Many homeowners with lower credit scores were probably also unable to take advantage of the refinancing boom which had the effect of lowering the age of mortgages among the higher credit score groups.
The Monitor also notes that loans originated in the last two years are performing well. Gradushy said, "We also looked again at mortgage performance and found delinquencies in 2012-2014 vintage loans lower than any of the prior seven years. In fact, even among borrowers with lower credit scores, these vintages are outperforming all previous vintages. This holds true for FHA mortgages as well, where we found that early-stage delinquencies were lower than in all pre-2012 vintages."
The company said 2014 has changed things very little for homeowners who were in foreclosure at the end of 2013. Nearly half of those loans (49 percent) were still in foreclosure at the end of August 2014. A bit more than a quarter of the loans had been foreclosed, sold in a short sale, or paid off. Only around 10 percent were current on their payments. Even more disheartening, 25 percent of all loans in foreclosure at the end of 2013 were modified at some point over the following eight months and then fell back into foreclosure.
Looking more widely at modifications completed on loans in foreclosure over the past four years, Black Knight found the three-month re-default rate on 2014 modifications to be the highest since 2011. This held true only for modifications on loans in foreclosure, though. Re-default rates on modifications of loans in delinquent statuses of both 90 days and 120 days or more past due actually saw re-default rates decline again in 2014, as they have for the last four years.
Black Knight also reported that, despite continuing low interest rates, the pre-payment rate in August showed its first decline in 7 months. Prepayments are closely tied to the rate of refinancing. The prepayment rate did not appreciably decline among the lowest credit score cohorts, but that group had also not demonstrated the level of prepayment activity rate that was evidenced among high score groups.
The percentage of purchase mortgage originations to those with credit scores above 720 was at the highest rate on record in August and nearly identical with that of refinancing originations. The share of high credit refinances has declined steadily since early 2013.
