MReport May 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 43 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 Millennial Move to Refi Lower interest rates piqued the interest of millennials, but will the trend last? L ower interest rates in Janu- ary saw more millennials opting to refinance their loans, according to Ellie Mae's Millennial Tracker. The report, which focuses on mortgage applications by millennials, noted that refinances by this group of borrowers accounted for 13 percent of all closed loans, the highest per- centage since February 2018. The report tracked a similar trend seen in Ellie Mae's Origination report, which saw refinances rising to 35 percent of all closed loans in Janu- ary, among all age-groups. "With average interest rates slightly falling in January, millen- nials took advantage of refinanc- ing opportunities," said Joe Tyrell, EVP of Strategy and Technology at Ellie Mae. "While we con- tinue to see millennials enter the housing market and exercise their purchase power, the uptick in refinances may indicate matu- rity among this generation who previously purchased a home and are looking for an opportunity to take advantage of lower monthly interest rate payments." Breaking up the applications by loan type, the report noted that refinances also made up a larger share of each type of loan in January. While refinances for conventional loans rose to 14 percent from 11 percent, FHA refinances rose from 6 percent to 7 percent. VA refinances also increased to 35 percent in January from 27 percent. Looking at the profile of the typical millennial refinancing their mortgage, the report indicated that the primary borrower refinancing their home was 33 years old with a FICO score of 728. Sixty-six percent of those who refinanced their home were married, while 33 percent were single. The major- ity of primary borrowers who refinanced were male. Despite the increase in re- finance, more millennials also entered the market in January. The share of conventional loans increased to 69 percent of all closed loans, while FHA loans to millennials held steady at 27 percent, according to the report. According to the report, Warrensburg, Montana; Somerset, Pennsylvania; Ottumwa, Iowa; Minot, North Dakota; and Williston, North Dakota, were the top five markets for millennial borrowers during that time. Fair Winds for Affordability What factors are giving homebuyers more purchasing power this spring? B uying a home is likely to get more affordable this spring as declining prices and mortgage rates give 6 percent more purchasing power while keeping monthly payments the same or a decrease of $62 per month in principal and interest on the average home, according to Black Knight's Mortgage Monitor report. The report indicated that annu- al home price growth has slowed for 10 consecutive months, falling from 6.8 percent year-over-year in February 2018 to 4.6 percent at the end of the year. As a result, the average value of a home also decreased by $850 in December. The declining values also indicate that it would now take 22.2 percent of median income to purchase a home with a 20 per- cent down payment and a 30-year fixed-rate mortgage. The falling rates are also boost- ing refinance of loans, the report indicated with 3.27 million home- owners with a mortgage likely to qualify for a refinance and reduce their current interest rate at least by 0.075 percent by doing so. The report noted that the rate declines, which fell to 4.35 percent in February 2019, could also result in increased cash out lending, which had softened last year as "equity utilization became more expensive in 2018." "While this is all welcome news for consumers heading into the spring home buying season, it remains to be seen whether rate declines and easing affordability will be enough to halt the decel- eration in home price growth," said Ben Graboske, President of Black Knight's Data and Analytics Division. While home prices are still increasing year-over-year across the nation's 100 largest markets, the report noted that home price appreciation is decelerating rap- idly with the slowdown being felt most acutely on the West Coast. California's annual home price appreciation declined from more than 10 percent in February 2018 to 3 percent in December. San Jose, Seattle, and San Francisco which were ranked first, third, and fourth respectively by annual home price appreciation in February 2018 have fallen to the bottom 25 percent of markets within the last 10 months. While home prices are still increasing year-over-year across the nation's 100 largest markets, the report noted that home price appreciation is decelerating rapidly with the slowdown being felt most acutely on the West Coast.

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