Prepayments hit two-year high as incentivized borrowers act

The
rate
at
which
consumers
prepaid
their
home
loans
soared
to
heights
not
seen
in
24
months
in
August,
suggesting
most
of
those
identified
as


having
incentives
to
refinance
did
so.

The
prepayment
rate
of
0.62%
was
nearly
5%
higher
than
July
and
up
18%
from
a
year
earlier,
in
line
with
previous
estimates
suggesting
roughly
that
many
borrowers
had
a
rate
incentive
of
at
least
75
basis
points,
according
to
ICE
Mortgage
Technology’s
latest
First
Look
report. 

That
borrower
responsiveness
suggests
that
refinance
prospects
may
continue
to
be
quick
to
act


if
rates
do
move
any
lower,
with
the
average
30-year
fixed
mortgage
recently
in
the
low
6s
and
many
loans
originated
in
recent
years
closer
to
7%.

But
there
continue
to
be
questions
about
how
quick
borrowers
will
be
to
refinance
given
some
may
fence-sit
in
anticipation
of
lower
rates
in
the
future.

How
homeowners
view
signals
from
the
Federal
Open
Market
Committee


which
pulled
the
trigger
on
a
short-term
rate
cut
this
month
—
and


what
their
mortgage
companies
say
about
it
—
may
impact
that.

Servicers
have
been
concerned
about
both
prepayments
and
delinquencies
picking
up
in
a
lower
rate
environment,
but
the
latest
data
from
ICE
Mortgage
Technology
shows
that
although
both
showed
notable
increases
recently,
they
remain
historically
low.

Serious
delinquencies,
defined
as
borrowers
that
haven’t
paid
their
loans
in
90
days
or
more
but
aren’t
in
foreclosure,
rose
to
a
six-month
high
of
450,000
last
month.

That
may
be
in
part
because
foreclosure
alternatives
have
proliferated
since
the
pandemic
and
pushed
more
loans
into
the
serious
delinquency
bucket
than
in
the
past.

The
average
delinquency
rate
of
3.34%
was
down
3
basis
points
form
the
previous
month
due
to
declines
in
shorter-term
arrears,
but
up
5.1%
from
a
year
earlier.