Low Rates Drove Refinance Boomlet During Third Quarter

Posted by Patrick Barnard on December 06, 2016 No Comments
Categories : Residential Mortgage

Remember the good old days, when fixed mortgage rates were below 4.0% and the refinance segment was booming?

Man, what a difference three months can make.

ATTOM Data Solutions’ quarterly origination volume report shows that approximately 1.9 million loans were originated in the third quarter – a decrease of 2% compared with the second quarter but an increase of 1% compared with a year earlier.

Of the approximately 1.9 million (1,919,180) loans that were originated, about 876,633 were refinances – up 7.0% compared with the second quarter and up 16.0% from the third quarter of 2015.

Refinances accounted for 45.7% of all originations in the third quarter – up from 42.1% in the second quarter and up from 39.5% from the third quarter of 2015.

About 743,880 of the loans originated were purchase loans – down 8% from the previous quarter and down 11% from a year earlier.

Prior to the third quarter, purchase originations had increased on a year-over-year basis for nine consecutive quarters going back to the second quarter of 2014, ATTOM notes.

Purchase originations accounted for 38.8% of all loan originations in the third quarter – down from 41.4% in the second quarter and down from 43.8% in the third quarter of 2015.

Higher average loan amounts – a function of increasing home prices – pushed the total dollar volume of loan originations to about $502 billion, an increase of 8% compared with the third quarter of 2015.

“The nominal increase in overall originations compared to a year ago masks divergent refinance and purchase loan origination trends during the quarter,” says Daren Blomquist, senior vice president at ATTOM Data Solutions, in a statement. “Refinance originations increased 16 percent compared to a year ago, while purchase originations were down 11 percent and home equity lines of credit [HELOCs] originations were down six percent. Uncertainty surrounding the outcome of the presidential election may have kept some would-be home buyers on the sidelines, while the prospect of rising interest rates following the election may have prompted many homeowners to refinance to lock in low interest rates.”

About 298,667 HELOCs were originated in the third quarter – a decrease of 7% compared with the previous quarter and a decrease of 6% from the third quarter of 2015.

Prior to the third quarter, HELOC originations had increased on a year-over-year basis for 17 consecutive quarters going back to the second quarter of 2012, ATTOM notes.

HELOC originations accounted for 15.6% of all loan originations in the third quarter – down from 16.5% in the previous quarter and down from 16.7% a year earlier.

Originations of loans backed by the U.S. Department of Veterans Affairs (VA) took a nice jump in the third quarter to reach a 10-year high, according to the report. A total of 143,366 VA loans were originated – up 2% from the previous quarter and up 26% compared with the first quarter of 2006.

VA loans accounted for 8.8% of all loans originated – up from 8.6% the previous quarter and up from 7.1% a year earlier.

A total of 266,404 loans backed by the Federal Housing Administration (FHA) were originated – down 7% from the previous quarter and down 15% from a year earlier.

FHA-backed loans accounted for 16.4% of all loans – down from 17.6% the previous quarter and down from 19.8% a year earlier.

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