Shoulda, woulda, coulda.
About 6.5 million borrowers could have benefited from refinancing their mortgages during the month of May, before interest rates started to rise again in June, according to a report from Black Knight Financial Services.
These borrowers could have saved up to $1.66 billion had they refinanced that month, Black Knight's May Mortgage Monitor indicates.
Of those 6.5 million, about 450,000 borrowers were eligible for refinancing through the government's Home Affordable Refinance Program (HARP), which is set to expire at the end of 2016.
About 3 million could have saved at least $200 per month via traditional refis; about 550,000 would save $500 or more, Black Knight's report shows.
The report also shows that an increase in interest rates of about 1% would impact home affordability by raising prices as much as 13%.
‘By looking at current interest rates on existing 30-year mortgages and applying broad-based underwriting criteria, we found that approximately 6.1 million borrowers make good candidates for traditional refinancing,’ says Ben Graboske, senior vice president for Black Knight Data & Analytics, in a release. ‘An additional 450,000 meet HARP-eligibility guidelines.
‘For both groups, the potential monthly savings could be substantial,’ he adds. ‘Some 550,000 American homeowners with a mortgage could save $500 or more each month by refinancing at today's rates. Over three million could save at least $200 per month. All told, in the aggregate, we're looking at about $1.5 billion that American homeowners could be saving every month through a traditional refinance. Add in the 450,000 HARP-eligible borrowers and that figure swells to about $1.66 billion in savings every month – almost $20 billion a year.
‘It's important to remember how rate-sensitive this population is, too; if rates go up just half a percentage point, 2.6 million people fall out of that refinanceable population,’ Graboske adds.
As luck would have it, interest rates started to rise again in June – thus, many of these borrowers are no longer eligible. However, the point remains that a high percentage of borrowers would benefit from refinancing – yet, they often do not realize it.Â
Looking at home affordability, the report finds that even after two-and-a-half years of consistent home price increases, payment-to-income ratios are still below pre-bubble levels nationally and far beneath those at the peak of the market.
‘Today, the principle and interest payment on a median-priced home is equivalent to 21 percent of median gross monthly income nationally,’ Graboske said. ‘In the years before the housing bubble, that ratio was closer to 25 percent to 26 percent, and at the height of the market in 2006, it peaked as high as 33 percent.
‘The monthly payment on a median-priced home is $400 less today than it was in 2006,’ he adds. ‘But, if we look at an example scenario where interest rates rise by 75 basis points a year and home prices appreciate by three percent annually, the payment-to-income ratio would be at 27 percent by 2017. In this scenario, the payment on the median-priced home would increase by $116 per month over the next year and $241 per month by March 2017. Overall, the impact of increasing interest rates on home affordability warrants ongoing attention. With all else being equal, a one percent increase in interest rates would impact affordability as much as a 13 percent jump in home prices.’
The total U.S. loan delinquency rate as of May was 4.96%, an increase of 3.95% compared to April.
The total U.S. foreclosure presale inventory rate was 1.49%, a decrease of 1.28% compared to April.
States with the highest percentage of delinquent loans in May included Mississippi, New Jersey, Louisiana, New York and Maine.
States with the lowest percentage of delinquent loans included Montana, Minnesota, South Dakota, Colorado and North Dakota.
States with the highest percentage of seriously delinquent loans included Mississippi, Rhode Island, Louisiana, Alabama and Arizona.