Mortgage Volume Was Abysmal In Q1

Posted by Patrick Barnard on May 26, 2017 No Comments

How well did mortgage lenders do during the first quarter, volume-wise?

In a word: abysmal.

At least, when compared with recent past quarters.

A little over 1.4 million loans (refinance and purchase loans) were originated – down 30% compared with the fourth quarter and down 21% compared with the first quarter of 2016, according to ATTOM Data Solutions.

In terms of total dollar volume, lenders originated about $347.9 billion in loans – a decrease of 21% compared with the first quarter of 2016.

It was the lowest total dollar volume since 2014, ATTOM says in its quarterly origination report, which is derived from publicly recorded mortgages and deeds of trust collected by the firm in more than 950 counties, accounting for more than 80% of the U.S. population.

A total of 675,899 refinance loans were secured by residential properties – down 36% compared with the fourth quarter and down 22% from the first quarter of 2016, according to the report. That’s a 10-year low.

The total dollar volume of refinance originations was $167.9 billion, down 39% from the previous quarter and down 26% from the first quarter of 2016 to reach the lowest level since the first quarter of 2006.

A total of 513,350 purchase loans were originated – down 29% from the previous quarter and down 18% from a year earlier.

The total dollar volume of purchase originations in the first quarter was $136.6 billion, down 27% from the previous quarter and down 14% from a year earlier to reach the lowest level since the first quarter of 2014.

“Rising mortgage rates made qualifying for a home purchase more difficult and refinancing an existing-home loan less attractive in the first quarter,” explains Daren Blomquist, senior vice president at ATTOM Data Solutions, in a statement. “Refinance originations in particular fell off a cliff in the first quarter to the lowest level in more than 10 years after posting double-digit-percentage increases in the third and fourth quarters of 2016, indicating that some refinance demand was pulled forward late last year in anticipation of rising interest rates.

“Despite the sharp drop in purchase originations, there were some encouraging signs in the data that a larger share of first-time home buyers participated in the housing market in the first quarter: The share of Federal Housing Administration [FHA] buyers increased from the previous quarter after two consecutive quarters down, and the median down payment decreased following three consecutive quarters of increases,” Blomquist adds. “However, the data also indicates more home buyers needed help to qualify for a home purchase in the first quarter. Nearly 22 percent of all single-family purchase originations had multiple, non-married co-borrowers on the loan – up from 20 percent a year ago.”

One of the arguably more disturbing findings in the report is that nearly 22% of loans originated for single-family homes in the first quarter were to non-married co-borrowers. This is a troubling sign because household formation has traditionally been a driver of mortgage origination. The increase in non-married co-borrowers calls into question the longevity of the loans: Will these borrowers end up staying together through the life of the loan? Will they have families? The report shows that the highest shares of co-borrowers were in the cities of Miami, Seattle, San Diego, Los Angeles and Portland.

“Throughout Southern California, housing affordability continues to be a contributing cause, supporting what has been viewed as an extremely tight available listing market year to date,” says Michael Mahon, president at First Team Real Estate covering the Southern California market, in the report. “Increased competition amongst buyers for low available listing inventory and increasing multiple-offer scenarios are driving down use of leveraging mortgages in support of resale transactions while driving increased use of all-cash offers to gain acceptance over competing buyers.”

Home equity line of credit (HELOC) originations also dropped to a three-year low. A total of 226,598 HELOCs were originated – down 14% from the previous quarter and down 22% from a year earlier.

The total dollar volume of HELOCs originated during the first quarter was $43.4 billion, down 14% from the previous quarter and down 18% from a year earlier to reach the lowest level since the first quarter of 2014.

Loans backed by the FHA accounted for 13.3% of all loans originated – up from 12.4% in the previous quarter but still down from 13.8% in the first quarter of 2016.

Loans backed by the U.S. Department of Veterans Affairs accounted for 6.6% of all loans – down from a more than 10-year high of 7.6% in the previous quarter and down from 6.8% in the first quarter of 2016.

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