Prepayments Drop To 20-Year Low

Prepayment activity dropped to a nearly 22-year low in September as interest rates rose to nearly 7%.

According to Black Knight’s September 2022 First Look. prepayment activity slid by 14.9% to a single-month mortality rate of 0.57% in September, besting January 2019’s record of 0.59%.

It’s the lowest level since November 2000.

Inflation is a factor in low prepayment activity, says Jacob Channel, LendingTree’s senior economic analyst. 

“Since the start of the year, inflation has increased significantly and as a result, many households likely have less cash that they can allocate toward non-necessities like putting extra money toward their mortgage payment,” he told MarketWatch.

Black Knight also reported that the national delinquency rate fell 0.2% from August to 2.78%.

This is just 3 basis points off from May 2022’s record low. The number of past-due mortgages stayed largely steady.

Though the number of borrowers with a single payment past due rose by 1%, 90-day delinquencies dropped by 1.5% and are 24% above pre-pandemic levels.

Foreclosure starts declined by 9% and were 53% below pre-pandemic levels. Starts were initiated on 3% of serious delinquencies, less than half the normal rate.

Foreclosure inventory remained depleted, holding steady from August. Active inventory hit record lows in 2021 and still has not come up.

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