➤ Key Highlights
ICE Mortgage Technology said in its December 2025 Mortgage Monitor report that declining mortgage rates helped to push servicer refinance retention to 28% in the third quarter — a 3.5-year high — as more homeowners sought to lower their monthly payments.
ICE found that overall mortgage performance was strong in October, with the national delinquency rate falling by 7 basis points (bps) to 3.34%.
Nonbank servicers retained borrowers at nearly three times the rate of banks — 35% compared to 13%.
Retention was highest for Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) loans at 36%, followed by loans backed by Fannie Mae and Freddie Mac at 25%.
Privately securitized loans saw the lowest retention at 6%.
Rate-and-term refinances made up 62% of all refi activity in October, the highest share in almost five years.
Second-lien home equity loan withdrawals rose to their highest level since 2007 in the third quarter.
About 79,000 loans entered foreclosure between October and November, which is 15% below 2019 levels but the highest two-month total in more than five years.
Mortgage refinance retention reached a 3.5-year high at 28% in the third quarter, driven by declining rates and increased borrower interest in lowering monthly payments. Nonbank servicers outperformed banks in retaining borrowers, especially among government-backed loans. Rate-and-term refinances dominated recent activity, while foreclosure starts increased but remained below pre-pandemic levels.
Applying the lens of evolving borrower preferences and refinancing behaviors, these developments highlight the significance of demand sensitivity within the mortgage market. Borrowers are increasingly responsive to rate shifts, adjusting their decisions and engagement based on changing incentives. The concentration of rate-and-term refinances and differences in retention across loan types reflect how borrower decision-making adapts to market conditions. This underscores the importance of understanding borrower behavior as a key indicator of broader demand dynamics in residential lending.
⚠️ Why it matters now
For CRE professionals, shifts in borrower preferences and refinancing activity inform demand assessments and risk considerations across capital markets and lending. Monitoring how borrowers respond to incentives and rate environments can help stakeholders anticipate changes in occupancy, performance, and refinancing flows. Understanding these behavioral patterns is critical for underwriting, portfolio evaluation, and policy formulation within the residential sector.
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➤ TAKEAWAY
Continued sensitivity to mortgage rates may further influence borrower engagement and refinancing trends in the near term. Stakeholders could see ongoing adaptation in borrower behavior as market conditions evolve, with implications for loan retention and demand forecasting. Tracking these patterns will remain essential to anticipating shifts in residential lending dynamics.
