– All four major performance metrics – delinquencies, serious delinquencies, active foreclosures and total non-current inventory – ended the year below 2000-2005 pre-recession averages for the first time since the financial crisis
– Both the national foreclosure rate and active foreclosure inventory have fallen below long-term norms; at the current rate of decline, both would reach near-record lows by the end of 2019
– 576,000 foreclosures were initiated in 2018, the lowest such annual total in more than 18 years
– First-time foreclosures were also at historic lows, with over 60 percent of foreclosure referrals last year being repeat actions, the highest share ever recorded
– Foreclosure sales (completions) hit a low of more than 18 years; 2018’s 175,000 foreclosure sales were down 25 percent from the year prior, and were 40 percent below their pre-recession average
The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon its industry-leading loan-level mortgage performance database. With full-year mortgage performance data in, this month’s report looked at 2018 in review. As explained by Ben Graboske, president of Black Knight’s Data & Analytics division, more than a decade past the start of the financial crisis, most metrics reflect a recovery to their long-term, 2000-2005 pre-recession averages. “Across the board, 2018 year-end numbers are good news from a mortgage performance perspective,” said Graboske. “All four major performance metrics – delinquencies, serious delinquencies, active foreclosures and total non-current inventory – ended the year below pre-recession averages for the first time since the financial crisis. Just 576,000 foreclosures were initiated throughout the entirety of 2018 – an 18-year low – and the vast majority of these were repeat actions. In fact, first-time foreclosures were down 18 percent from the year before, hitting the lowest point we’ve seen since Black Knight started reporting the metric in 2000. Even repeats – though making up more than 60 percent of all foreclosures – were down 6 percent from 2017.
“These year-end numbers are further proof of what we’ve been observing for some time now. The high credit quality and corresponding lower risk we’ve seen in the post-crisis origination market for the better part of a decade continues to pay dividends in terms of mortgage performance. In addition, the low interest rate environment we’ve enjoyed for so long had – until very recently – resulted in a refinance-heavy blend of originations for years. Refis, as a whole, tend to outperform their purchase mortgage counterparts, which has boosted mortgage performance as well. On top of that, we’ve had the benefit of strong employment and housing markets, which have helped the vast majority of homeowners meet their debt obligations, while those few who may have faced a possible default have gained enough equity to be able to sell rather than face foreclosure.” As the average interest rate on a 30-year mortgage ticked down again in January, falling below 4.5 percent for the first time since April 2018, Black Knight revisited the impact this change has had on the refinanceable population. The decline in rates has returned the interest rate incentive to refinance to 1 million homeowners, a 50 percent increase in rate/term refinance incentive over just the last two months. There are now 2.9 million homeowners with mortgages who could likely qualify for a refinance under broad-based criteria and also reduce the interest rate on their first mortgage by at least 0.75 percent by doing so, the largest this population has been since January 2018. Even if rates should hold steady – and certainly if they fall further – this could lead to an unexpected bump in refinance volumes in early 2019.
As was reported in Black Knight’s most recent First Look news release, other key results include:
– Total U.S. loan delinquency rate: 3.88%
– Month-over-month change in delinquency rate: 4.71%
– Total U.S. foreclosure pre-sale inventory rate: 0.52%
– Month-over-month change in foreclosure pre-sale inventory rate: 1.19%
– States with highest percentage of non-current loans: MS, LA, AL, WV, AR
– States with lowest percentage of non-current loans: ND, ID, WA, OR, CO
– States with highest percentage of seriously delinquent loans:MS, LA, AL, AR, NC
GM expected to start cutting 4,000 jobs
It is Black Monday for workers at General Motors. The automaker is expected to start its next round of white-collar job cuts Opens a New Window. Monday, but the carmaker apparently has fewer staff reductions left to make than has been anticipated. In November, GM said it needed to reduce its North American white-collar workforce by about 8,000. About 2,250 salaried workers volunteered to take a buyout, leaving as many as 5,750 workers still to be cut. But on Friday a GM spokesman said the automaker had trimmed about 1,500 contract jobs, meaning about 4,000 more staff jobs will be cut, according to the Detroit Free Press. Many salaried workers inside GM have said they and colleagues have been on pins and needles for the past two months, ever since GM said it would make involuntary cuts. Those who spoke to the Free Press did so on the condition of anonymity for fear of losing their jobs. The employee said some department leaders have told workers to forego scheduling vacation time in the first two weeks of February, an insinuation that the involuntary cuts will be made at that time. Many of GM’s hourly workers in the United States and Canada have held protests and prayer vigils in a campaign to persuade the automaker to reverse its Nov. 26 GM announcement to indefinitely idle five plants in North America. More than 6,200 jobs are at stake. GM said its decision to cut nearly 14,000 jobs and idle five plants in North America will save $2 billion to $2.5 billion in 2019. GM is scheduled to release its fourth-quarter earnings on Wednesday.
Congress to consider proposal to privatize Fannie Mae, Freddie Mac
Congress may now finally be gearing up to reform government-sponsored enterprises Fannie Mae and Freddie Mac. Senate Banking Committee Chairman Mike Crapo (R-ID) released an outline Friday for housing finance reform legislation. The outline incorporates elements of many plans and principles for housing finance reform legislation that have been discussed by legislators, analysts, stakeholders and thought leaders. “We must expeditiously fix our flawed housing finance system,” Crapo said. “My priorities are to establish stronger levels of taxpayer protection, preserve the 30-year fixed-rate mortgage, increase competition among mortgage guarantors, and promote access to affordable housing.” “I invite my Senate and House colleagues, the Administration and all interested stakeholders to work together to enact this critically needed reform,” he said. Here are some of the goals for Crapo’s proposed legislation:
– Reduce the systemic, too-big-to-fail risk posed by the current duopoly of mortgage guarantors
– Preserve existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capital
– Establish several new layers of protection between mortgage credit risk and taxpayers
– Ensure a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standards
– Promote broad accessibility to mortgage credit, including in underserved markets
And the outline is already drawing support. “The outline released today by Senate Banking Committee Chairman Crapo is a great reflection on the work that has been done to date by members of the committee, including the chairman, and takes into account some of the key lightning rod concerns of stakeholders,” said David Stevens, former head of the Mortgage Bankers Association and Federal Housing Administration. “It draws a bright line between guarantors and banks,” Stevens said. “It limits the role of the guarantor. It provides for multiple private guarantors, reducing too-big-to-fail concerns. It protects the use of mortgage insurance on loan-to-values over 80%. It locks in a level playing field on pricing for all lenders and requires FHFA to approve all pricing. It takes into account the Ginnie Mae programs and its role as a securitization entity.” Former Ginnie Mae president Michael Bright, who is now president and CEO of the Structured Finance Industry Group, also announced his support. “A future state for housing finance should have clearly defined roles for who is taking on risk, private capital or the government,” Bright said. “It must also ensure that our housing markets work for all Americans. The current structure of conservatorship has helped our country to transition from crisis to economic growth, and the Federal Housing Finance Agency should be commended for the work it has done.” “But an opportunity exists to make meaningful changes that enhance consumer access to credit, add financial stability guardrails, and ensure a more vibrant and liquid secondary market that does not put taxpayers at direct risk of loss,” he said. “In our view, a role for Congress is critical to effectuate these important changes.”
Boeing seeing more airplane buyers paying cash, financing than ever before
Growing global demand and the profitability of airlines in North America have pushed Boeing, the world’s largest airplane maker, to increase production rates on two of its most successful aircraft models. “We’re seeing more customers with near-term demand and in the ability to either finance or pay cash than we’ve ever seen,” Boeing Chief Financial Officer Greg Smith said. The company will now produce 57 737s a month (up from 52) and will increase production of its 787 Dreamliner to 14 per month (from 12). The U.S. airplane maker has nearly 5,900 aircraft currently on backlog, valued at $490 billion. Over the course of the next 20 years, Boeing forecasts 8,800 airplanes will need to be delivered to airlines. “When you look at the assets that are in North America today … almost half of that is being replaced with much more efficient … [aircraft] than what they’re operating today,” Smith said, regarding operating costs. “So that’s creating a lot of demand.” Boeing shares have gained 20 percent year-to-date and are approaching their all-time closing high ($392.30), which was set on Oct. 3, 2018. The stock finished the week at $387.43. The ramp-up in production also carries a risk that Boeing has experienced before, according to analysts. That includes pileups of unfinished aircraft at its Renton, Washington assembly plant due to late arrivals of CFM’s LEAP-1B engines for the 737 MAX model and delayed deliveries of 737 fuselages made by Spirit AeroSystems.
Boeing CEO Dennis Muilenburg previously said the company is getting in front of those challenges by sending Boeing personnel to CFM – a joint venture between General Electric and French company Safran Aircraft Engines – and their sub-tier suppliers to address concerns and help make sure the engine maker can meet the increased demand. “The suppliers are now in much better position to have experienced those … teething issues,” Josh Sullivan of Seaport Global Securities told FOX Business. “So, the supply chain is much healthier this year.” While global traffic grew 6.6 percent through November last year, which is faster than the world’s GDP, according to Muilenburg, the U.S. still ranks lower when compared to other markets, particularly Asia. Because of this, Boeing forecasts 16,000 aircraft will need to be delivered to airlines in the region over the next two decades. “There’s a lot of replacement opportunity there near term and long term,” Smith said. “There’s also more growth there, and that just goes to the fundamentals of what’s happening within their society and their economy, with the growth in middle class and in the real desire to travel … within the region but also outside of the region.” And while Boeing hasn’t released an outlook for employment in 2019, the company still sees a demand for jobs as the rate of production and other programs increase or moderate. The aerospace giant brought in more than 30,000 workers last year (not all net hires – some due to the rate of attrition and retirement), and focuses on hiring the right talent.