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36 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION The True Cost of Poor Credit for Homeowners Borrowers with lower credit scores are likely to be paying more in additional costs. B orrowers with lower credit scores are likely to be paying more in additional costs in mortgage costs according online loan marketplace, LendingTree's Mortgage Offers Report for December 2017. According to the report, consum - ers with the highest credit scores (760+) saw offered APRs of 4.26 percent in December, against 4.56 percent for consumers with scores of 680-719. The APR spread of 30 basis points between these score ranges was 3 points wider than in November and the widest since this data series began in April 2016. "The spread represents nearly $15,000 in additional costs for bor - rowers with lower credit scores over 30-years for the average purchase loan amount of $233,586. The additional costs are due to higher interest rates, larger fees, or a combination of the two," said Tendayi Kapfidze, Chief Economist at LendingTree. The report, which was re - leased in January, indicated that December's best offers for bor- rowers with the best profile had an average annual percentage rate (APR) of 3.8 percent for conform- ing 30-year fixed purchase loans, up from 3.75 percent in November. The report contains data from actual loan terms offered to bor- rowers on LendingTree by lenders, and helps to empower consumers by providing additional informa- tion on how their credit profile affects their loan prospects. In terms of refinance loans, the report indicated that refinance loan offers were up 1 basis point to 3.7 percent. For the average borrower, purchase APRs for conform - ing 30-yr fixed loans offered on LendingTree's platform were up 12 basis points to 4.42 percent, the highest since July 2016. The loan note rate hit the highest since March 2016 at 4.32 percent and was up 14 basis points from November. "We prefer to emphasize the APR as lenders often make changes to other fees in response to chang - ing interest rates," Kapfidze said. The report indicated that while refinance APRs for conforming 30- yr fixed loans were up seven basis points to 4.31 percent, the credit score bracket spread widened to 24 from 20 basis points, amount - ing to $12,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $241,973. Average proposed purchase down payments have been rising for eight months and reached $63,740 in December, the report noted. Homeowners Have Nearly $5.4 Trillion in Equity This represents an all-time high, and up more than $3 trillion since the bottom of the market in 2012. L ast month, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report for November 2017. According to the data, as of the end of Q 3 2017, 42 million homeowners with a mortgage now have an aggregate of nearly $5.4 trillion in equity available to borrow against. Ben Graboske, EVP of Data & Analytics at Black Knight, said that this represents an all-time high, and up more than $3 trillion since the bottom of the market in 2012—as over 80 percent of all mortgage holders now have available equity to tap via first- lien cash-out refinances or home equity lines of credit (HELOCs). "We've noted in the past that as interest rates rise from historic lows, HELOCs represented an increasingly attractive option for these homeowners to access their available equity without relinquishing interest rates below today's prevailing rate on their first-lien mortgages," Graboske explained. "However, with the recently passed tax reform package, interest on these lines of credit will no longer be deductible, which increases the post-tax expense of HELOCs for those who itemize." There are many factors to consider before a borrower determines which method of equity extraction is the most economical, but Graboske noted that in many cases for those with high unpaid principal balances (UPB) who are taking out lower line amounts, the math still favors HELOCs. "However—assuming interest on cash-out refinances remains deductible—for low-to-moderate UPB borrowers taking out larger amounts of equity, the post-tax math for those who will still itemize under the increased standard deduction may now favor cash-out refinances instead, even if the result is a slight increase to first-lien interest rates," said Graboske. The report also takes an in- depth look at how the increase in equity, driven by rising home prices, has also continued to decrease the population of underwater borrowers. Black Knight's analysis notes that the number of underwater borrowers declined by 800,000 over the first nine months of 2017— representing a 37 percent decline in negative equity. Only 2.7 percent of homeowners with a mortgage, which is an estimated 1.36 million borrowers, now owe more than their home is worth, which is the lowest rate since 2006. Additionally, Black Knight's data found that the national delinquency rate jumped by 2.5 percent from last month, attributing the increase to "typical seasonality." Meanwhile, November experienced the second fewest foreclosure starts in 2017 and the third fewest of any month since 2004. In addition, prepayment activity dropped by 12.41 percent month-over-month, falling to 31.47 percent below 2016's level.