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January 2022 Mortgage Monitor

Record $4.4 Trillion in Mortgage Originations in 2021; Year Sees $1.2 Trillion in Cash-Out Refis as Homeowners Tap $275 Billion in Equity, a 16-Year High

  • Total 2021 originations slightly outpaced 2020’s prior record high of $4.3 trillion, with purchase lending ending the year at $1.7 trillion, the highest level on record
  • While overall refinance originations fell 34% from last year – with rate/term refis dropping 60% – cash-out lending rose 13% over 2021, buoyed by surging home values
  • Of $2.7 trillion in refinances originated last year, $1.2 trillion were cash-outs – the most since 2005 and within 1% of an all-time high – as homeowners tapped $275 billion in equity over the course of the year
  • The $80 billion in equity tapped in Q4 2021 marked the largest quarterly volume in 15 years, as more than 1 million homeowners withdrew equity via cash-out refinance for the fifth consecutive quarter
  • Q4 2021 also saw the largest share of total available equity withdrawn since 2005, though homeowners are tapping their available equity at roughly half the rate than at the prior peak
  • Underlying risk of these loans remains low, with average credit scores above 740 and soaring home values resulting in much lower post-withdrawal loan-to-value (LTV) ratios than in years past
  • Despite overall retention hitting an eight-year high in Q4 2021, the retention rate on cash-outs is 8 percentage points below that of rate/term refis, in a market shifting heavily to equity-centric lending
  • On average, borrowers that changed lenders received rates just 5 basis points lower than those retained, a clear indication that – while important – pricing is not the only key to successful customer retention

JACKSONVILLE, Fla. – March 7, 2022 – Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage, real estate and public records datasets. This month’s report looks into 2021’s record-breaking $4.4 trillion in mortgage originations and the distinct shift to an equity-driven refinance market. According to Black Knight Data & Analytics President Ben Graboske, though American homeowners are tapping their homes’ equity via cash-out refinances at the highest level since 2005, they are doing so judiciously, at roughly half the rate seen back then. tapping their homes’ equity via cash-out refinances at the highest level since 2005, they are doing so judiciously, at roughly half the rate seen back then.

“Entering 2021, consensus opinion was that originations would likely come in 20-25% lower than 2020’s record-breaking levels,” said Graboske. “Our own forecast suggested a slighter decline, on the order of -7%. In the end, total originations came in at $4.4 trillion, actually outpacing the prior record. At $1.7 trillion for the year, purchase lending also hit the highest point ever recorded, while the $2.7 trillion in refinance lending was a bit below 2020 levels. What stands out is the 20% growth in cash-outs over 2021, which accounted for $1.2 trillion in originations last year and $275 billion in equity withdrawn. In Q4 alone, homeowners tapped $80 billion – the most in 15 years – while marking the fifth consecutive quarter of more than 1 million borrowers pulling cash out. And yet, despite that sizable withdrawal, surging home values meant overall tappable equity still grew by nearly $450 billion in the quarter.

“Likewise, rising home values are resulting in much lower post-cash-out LTVs than we’ve seen in recent years – and more than 10 points lower than during the previous peak – while high average credit scores are also helping to lower the overall risk profile of these loans. We’ve been discussing this shift to an equity-centric market for some time, and our Optimal Blue rate lock data showed that cash-out activity continued to increase in January of this year as well. Now for the bad news: retention of cash-out refinance borrowers has been notoriously difficult. 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. Servicers continue to struggle with this segment, despite strong improvement.”

Drilling in deeper to the latest retention data, the report finds that borrowers who changed lenders received interest rates just 5 basis points lower, on average, than those who were retained by their current lender/servicer – the smallest delta in 2.5 years. This suggests pricing – while certainly important – is not the only factor necessary to retain a current customer, particularly if they are looking to take equity out of their home. Lenders and servicers that create a positive customer experience see greater loyalty and retention. Indeed, servicers using Black Knight’s cloud-native Servicing Digital customer engagement platform saw nearly 20% better retention for loans that were on the platform as compared to those that were not.

Retention metrics also highlight the need for data-driven marketing strategies and portfolio analysis, especially with rate/term refinance incentive cut by 65% year-to-date and lenders competing for a shrinking pool of high-quality candidates. In a market dominated by equity-centric lending, it becomes paramount for lenders/servicers to be able to accurately identify borrowers who meet certain defined criteria and are most likely to tap into the record levels of equity, and then create targeted marketing campaigns personalized for those specific borrowers.

About Mortgage Monitor

The Data & Analytics division of Black Knight manages the nation’s leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the Black Knight HPI and Collateral Analytics’ home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

Black Knight’s research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.blackknightinc.com/data-reports/

About Black Knight

Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.

Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serving their customers. For more information on Black Knight, please visit www.blackknightinc.com.

About Mortgage Monitor

ICE manages the nation’s leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the ICE Home Price Index and Collateral Analytics’ home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

ICE’s research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.icemortgagetechnology.com/resources/data-reports

About Intercontinental Exchange

Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500 company that designs, builds and operates digital networks that connect people to opportunity. We provide financial technology and data services across major asset classes helping our customers access mission-critical workflow tools that increase transparency and efficiency. ICE’s futures, equity, and options exchanges – including the New York Stock Exchange – and clearing houses help people invest, raise capital and manage risk. We offer some of the world’s largest markets to trade and clear energy and environmental products. Our fixed income, data services and execution capabilities provide information, analytics and platforms that help our customers streamline processes and capitalize on opportunities. At ICE Mortgage Technology, we are transforming U.S. housing finance, from initial consumer engagement through loan production, closing, registration and the long-term servicing relationship. Together, ICE transforms, streamlines and automates industries to connect our customers to opportunity.

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Media Contacts

Mitch Cohen
704.890.8158
mitch.cohen@bkfs.com​​​

Katia Gonzalez
678.981.3882
katia.gonzalez@ice.com