mortgage monitor december 2013

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Black Knight Mortgage Monitor Mortgage Market Performance Observations

Data as of December, 2013 Month-end

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Focus 1: Mortgage Performance Update and Year-end Review

Focus 2: Originations, Underwriting Standards and Credit Quality

Focus 3: Home Prices, Property Sales and Negative Equity

Focus Points

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Market has experienced years of significant and sustained improvement in DQ and FC inventories

Delinquencies are now just 1.5x the pre-crisis average with foreclosures 4.6x (down from over 8)

Foreclosure starts ended the year at the lowest level since April 2007 and pipelines are clearing in most states

Sizeable delinquent inventories remain in the north- and south-east

Focus Point 1: Mortgage Performance Update and Year-end Review

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Market has experienced four years of significant, sustained improvement in DQ %s and two in FC %s

Foreclosure inventory dropped ~30% in 2013

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Delinquencies are now just 1.5x pre-crisis average; Foreclosures are 4.6x

90+ Delinquencies down 14% in judicial states vs. 21% in non-

judicial over 2013

Judicial foreclosure inventories are 3.5x non-judicial

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Foreclosure starts ended the year at the lowest level since April 2007

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Pipelines are clearing, even in (most) states with judicial or legislative slow-downs

Massachusetts: -49% Oregon: -36% California: +36% New York: -39%

New Jersey: -37% Hawaii: -52% Connecticut: -42% Maryland: -44%

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Change since June ‘13


Non-current %: NJ and NY now on par with FL and NV, 2x rates in CA and AZ

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Prepayment rates remained low through October – November rate decline

Rates and seasonality pushed monthly originations to the lowest level since 2008

Underwriting criteria is still very strict with “looser” credit standards primarily focused on the refinance population (compensated by lower LTV)

As a result, performance of recent vintages is exceptional

Focus Point 2: Originations, Underwriting Standards and Credit Quality

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Prepayment rates remain low despite recent decline in rates

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Higher interest rates and seasonality pushed originations to the lowest level since 2008

At over 16%, non-gov’t participation was the highest since 2007

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Underwriting criteria is still very strict compared to pre-bubble vintages

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“Looser” credit standards are focused primarily on the refinance population

Refis offer greater

LTV risk protection

Vintage Purchase Refinance

2010 74 66

2011 76 67

2012 77 74

2013 78 71

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As a result of tighter underwriting, 2013 is the best performing vintage on record

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Home equity originations are up significantly vs. a year ago

100% = unchanged vs. last year

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2013 sales were the strongest since 2007 while national home prices continue to improve

Non-judicial state home prices are recovering faster than judicial states with associated new problem loan rates showing greater improvement

With home price improvement and delinquent inventory liquidation, negative equity continues to improve, but less so where the foreclosure process is slower

Focus Point 3: Home Prices, Property Sales and Negative Equity

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Sales volumes have declined, but 2013 was a very strong year

Sales through November 2013 outnumber full year ‘10, ‘11 & ‘12 Conservative estimates indicate best year since 2007

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National home prices continue to improve

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Non-judicial state home prices are recovering faster than judicial states

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Negative equity continues to improve; but more slowly where FC process is slower

Nevada: -43% Florida: -29% Georgia: -47% Illinois: -39%

New Jersey: -11% Rhode Island: -19% (Not shown) Arizona: -39% California:-50%

Change since Dec-12

Over 75% of 90+ delinquencies and loans in foreclosure are “underwater”

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New problem loan rates are showing greater improvement in non-judicial states as well

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BKFS Mortgage Monitor Appendix

Data as of December, 2013 Month-end


December 2013 Data Summary

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Seven of the top 10 states for total non-current are judicial

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Loan counts and average days delinquent

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BKFS Mortgage Monitor

Disclosures: Product / Metric Definitions and Market Sizing


Disclosure Page: Product Definitions

*Conforming limits do not account for temporary or high-cost area increases.

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Disclosure Page: Metrics Definitions

Total Active Count: All active loans as of month-end including loans in any state of delinquency or foreclosure. Post-sale loans and loans in REO are excluded from the total active count.

Delinquency Statuses (30, 60, 90+, etc): All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquent.

90 Day Defaults: Loans that were less than 90 days delinquent in the prior month and were 90 days delinquent, but not in foreclosure, in the current month.

Foreclosure Inventory: The servicer has referred the loan to an attorney for foreclosure. Loans remain in foreclosure inventory from referral to sale.

Foreclosure Starts – Any active loan that was not in foreclosure in the prior month that moves into foreclosure inventory in the current month.

Non-Current: Loans in any stage of delinquency or foreclosure. Foreclosure Sale / New REO: Any loan that was in foreclosure in the prior month that

moves into post-sale status or is flagged as a foreclosure liquidation. REO: The loan is in post-sale foreclosure status. Listing status is not a consideration,

this includes all properties on and off the market. Deterioration Ratio: The ratio of the percentage of loans deteriorating in delinquency

status vs. those improving.

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Disclosure Page: Extrapolation Methodology

Mortgage statistics are scaled to estimate the total market performance based on coverage within the McDash database.

The following table contains information on market coverage by product as of June 2012; extrapolations also include adjustments for vintage and as of date. Additional information is available upon request.

mortgage monitor december 2013

Real Estate

nonjudicial states

nonjudicial state home

home equity originations

national home prices

home price improvement

underwriting standards

credit quality focus

greater improvement