MReport October 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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46 | 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 Largest Quarterly Origination Volume on Record Here's what rate lock data suggests for Q3, and how servicer retention rates are holding up. B lack Knight just released its findings from its latest Mortgage Monitor report. The report covered a smattering of housing industry news, including Q2's record-break- ing origination numbers, what rate lock data suggests is in store for Q 3, and how servicer reten- tion rates are holding up amid the surge of refi activity. Beginning with the analysis of Q2 2020, this period experienced the greatest quarterly origination volume to date (reporting nearly $1.1 trillion in first lien mortgages originated). Experts attribute this impressive number to be a direct result of the historically low interest rates in the market today, which are acting as catalysts for a storm of refinancing. In regard to refinancing, refinance lending rose over 60% from the prior quarter (Q1 2020), bringing it to 200% higher than this same time last year (in dollar value, this makes up almost 70% of all first lien originations). Specifically, a staggering statistic of 2.3 million refis were reported as originating in Q2 2020. This impressive amount was the high- est amount experienced in almost 17 years. Experts attribute this uptick to have been the result of a more than 4x annual increase in rate/term refis. As for cash-out lending, that rose as well, yet at a lesser percentage of 66% (year over year). For cash-out refinances that occurred during the quarter, the average equity withdrawal was $62,000, a statistic that represented the lowest seen in more than three years (since 2016). In stark contrast, total quarterly with- drawal volumes skyrocketed to their highest levels in more than a decade, reaching an aggregate $44.5 billion in equity tapped via cash-outs. Purchase loans originating this quarter amounted to $351 billion, driven by low rates and improved affordability. Based on rate lock data, expert analysts believe that the spring homebuy- ing season was pushed back to summer. With purchase locks during Q2 falling 10% below what was expected, they've since risen (up 36%), flying in the face of the normal housing market trends. As of now, purchase locks scheduled to close in Q 3 are 23% above seasonal expectations, which the two quarters combined are now more than 6% above expected seasonal volumes. What's more, the rate lock data appears to predict an even greater surge in refinance lending. Specifically, locks on refis expect- ed to close in the third quarter are already up 20% from Q2. Black Knight Data & Analytics President Ben Graboske offered his expert insights on the current market, as well as what lies in store: "With market conditions as they are and given the recent delay of the 50 basis points fee on GSE refinances until December, we would expect near-record low interest rates to continue to buoy the market. After all, there are still nearly 18 million homeowners with good credit and at least 20% equity who stand to cut at least 0.75% off their current first lien rate by refinancing." How Many Homebuyers Report Receiving Down Payment Assistance? As home prices continue their upward climb, many homebuyers are finding they need financial support to achieve their homeownership goals. A bout four in 10 home- buyers of all ages are relying on help from family members, friends, employers, or a down payment as- sistance program to get a mortgage for their home purchase. That's from a new LendingTree report focused primarily on home- buyers' down payment plans. As home prices continue their upward climb, many homebuyers are finding they need financial support to achieve their home- ownership goals, according to Crissinda Ponder, a mortgage reporter for LendingTree. The survey of more than 1,000 homebuyers reveals their down payment plans, while also gauging their understanding of the overall mortgage lending process. Of millennial homebuyers, 59% are receiving help with a mort- gage down payment. "The large share of millen- nials receiving down payment help highlights the importance of intergenerational wealth trans- fers," said Tendayi Kapfidze, LendingTree's Chief Economist. "Much of the down payment as- sistance comes from accumulated equity from homes owned by older generations." Additionally, more than two- thirds (73%) of first-time homebuy- ers say they're receiving some form of down payment help. Nearly a third (31%) of home- buyers plan to contribute at least a 20% down payment. Baby boomers are the age group most likely—at 56%—to put down 20% or more. By contrast, only 29% of Gen Xers and 22% of millennials plan to spend as much on their down payment. About 1 in 5 (21%) first-time buyers plan to put down 5% to 9% of their home's purchase price, while 22% of repeat buyers plan to put down 10% to 14%. Only 18% of Black homebuyers say they'll put down at least 20%, compared with: • 33% of white buyers • 32% of Asian buyers • 26% of Hispanic or Latino buy- ers More than half (51%) of home- buyers plan to get a conventional loan. Additionally, 4 in 10 home- buyers have very little to no knowledge of the mortgage lending process. However, 44% of buyers say they know a lot—but not everything—about getting a mortgage, and another 17% say they know everything there is to know about the topic.

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