Originations hit a record $4.4 trillion in 2021

The mortgage industry originated a record $4.4 trillion last year, activity led by record purchase lending volume and a surging cash-out refinance appetite, Black Knight revealed.

The $1.7 trillion in purchase lending is the most ever recorded, according to Black Knight’s Mortgage Monitor Report of January data. Refi originations fell 34% last year compared to 2020 but still accounted for $2.7 trillion in volume, including $1.2 trillion in cash-out refis, the most since 2005.

Homeowners in cash-out refis withdrew $275 billion in equity last year and $80 billion in Q4 2021 alone, the most prolific quarter in 15 years, Black Knight said. The available equity withdrawn was the most since the Great Recession, although still just half of the all-time high reached in 2006.

“Despite that sizable withdrawal, surging home values meant overall tappable equity still grew by nearly $450 billion in the quarter,” Black Knight President Ben Graboske said in a press release.

Home prices in January grew 19% from the same time last year and the average home price grew more than 1% from the previous month for the 13th time since the onset of the coronavirus pandemic, Black Knight reported. Rising values have led to loan-to-value ratios of 63% for the average cash-out refi borrower, a figure 10% lower than Great Recession borrowers, Black Knight found. Those same borrowers also tout average credit scores above 740.

The record pricing could continue to rise amid low supply and rising mortgage rates, although Russia’s invasion into Ukraine sparked a rate decline amid investor uncertainty. Cash-out refis were poised to increase with rising rates, as the number of high-quality rate and term refi candidates dropped 65% from 11 million in December to 3.8 million in January, according to Black Knight.

Delinquencies dropped 2.37% from December to 3.3% in January, a rate near Black Knight’s record-low figure in January 2020. Across the industry, 859,000 mortgages remain seriously delinquent, although the rate fell 9.2% from December to January. Hundreds of thousands of those borrowers in loss mitigation plans aren’t paying, a separate study from the Federal Reserve Bank of Philadelphia found. Foreclosures also increased sevenfold, Black Knight reported, but the activity remains over 20% below pre-pandemic levels.

Servicers enjoyed a 9% climb in retention of refi borrowers to their highest level in eight years but still had trouble with cash-out refi borrowers, the report said. Headwinds loom, however; borrowers shopping found interest rates just 5 basis points lower on average, the lowest delta between the market and their current servicer in two and a half years, suggesting price wasn’t the only retention factor. Private-label security investors retained only 6% of refi borrowers.

“Even in a quarter that saw overall retention rates hit an eight-year high, cash-out retention was still 8 percentage points lower than for rate/term refis,” Graboske said. “Servicers continue to struggle with this segment, despite strong improvement.”