TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/806370
TH E M R EP O RT | 49 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 ORIGINATION THE LATEST Refis Up, Purchase Originations Down Rising interest rates might be behind both trends. P urchases may be on the decline, but it seems re- finances are bucking the trend. According to AT- TOM Data Solutions' Residential Property Loan Origination Re- port, refinance originations were up 20 percent in Q 4 2016—totaling 883,836 and $246 billion. This is up 27 percent over the year. The top metro areas for refis were all on the West Coast: Olympia, Washington (up 108 percent); Spokane, Washington (77 percent); Boulder, Colorado (74 percent); San Diego (73 percent); and Eugene, Oregon (72 percent). A possible explanation for the sudden jump? According to Daren Blomquist, SVP at ATTOM, it could be buyers anticipating further rate hikes in the months to come. "The increase in refinance originations is surprising given the rising interest rates in the fourth quarter," Blomquist said, "but many homeowners may have been trying to lock in still relatively low interest rates before those interest rates rose further." The already rising rates did seem to have an impact on overall purchase loan originations, though. Those totaled 595,000 in Q 4, down 26 percent from Q 3 and 12 percent from one year prior. For the year, purchase loans were down 1 percent from 2015. The biggest drops were seen in Naples, Florida (down 23 percent); Austin, Texas (20 percent); and Fort Collins, Colorado (19 percent). "On the other hand, rising interest rates did seem to have a chilling effect on homebuyers us - ing financing," Blomquist said, "as evidenced not only by the drop in purchase loan originations but also a corresponding rise in the share of cash buyers, drop in FHA buyer share, and a rise in the aver - age down payment percentage in the fourth quarter compared to the previous quarter." Purchase originations are declin - ing for big banks, too. Wells Fargo experienced a 5 percent decrease and JPMorgan Chase a 15-per- cent one. The top purchase loan originators for Q 4 were Quicken Loans and Caliber Home Loans. Data for ATTOM's Loan Origination Report is pulled from publicly recorded mortgage and deeds of trust across 950 counties in the United States. Housing Market Value Nears $24 Trillion Household equity and total debts/ mortgages are on the rise, pushing up the overall housing market value. T he total value of the housing market is continuing its upward trend, according to the Urban Institute's Housing Finance at a Glance February Chartbook, which shows increases in both to - tal debts/mortgages and household equity for Q 3 2016. Total debts/mortgages increased to $10.2 trillion for the quarter, while equity jumped to $13.7 trillion, bringing the grand total value of the nation's housing market to $23.9 trillion. Nearly 60 percent of that is comprised of agency mortgage-backed securities (MBS); 5.3 percent is private-label securities; 30 percent is unsecuri - tized first liens at GSEs, com- mercial banks, savings institutions, and credit unions; and 6 percent is second liens. Ninety-one percent of new originations were 30-year fixed- rate mortgages, 6.4 percent were 15-year fixed-rate mortgages, and just 1.2 percent were adjustable- rate mortgages (ARMs). ARMs have seen a significant drop-off in recent years, accounting for nearly 42 percent of all new originations in 2005 before falling to an all- time low of 1 percent by 2009. Agency issuance is on the rise, totaling $136.6 billion for January 2017—a jump of nearly $50 billion since the same time last year. Refinances accounted for 59 percent of GSE business, a slight drop from 2016. That drop will likely continue as 2017 goes on. "The interest rates have gone up sharply since Election Day in November 2016, which will cut refinance activity," the report said. "The delayed impact on agency issuance will show up in the next few months." The rising interest rates are expected to impact all originations in 2017, with Fannie Mae, Freddie Mac, and the Mortgage Bankers Association (MBA) projecting origination volume to fall in the $1.5 trillion to $1.6 trillion range— a drop from 2016's $2 trillion. The jury is out on how they'll impact sales, though; Freddie Mac predicts a slight decrease from 2016's total sales volume, while the MBA and Fannie Mae expect an increase. This is likely due to expanding credit availability and continued housing affordability—factors that will likely be unchanged even if rates jump further. "Home prices are still very af - fordable by historic standards, de- spite increasing over the last four years" the report stated. "Even if interest rates rise to 5.5 percent, affordability would still be at the long-term historical average." According to the report's Housing Credit Availability Index, credit availability was up slightly in Q 3 2016, though it is still less than half of what was available from 2001 to 2003. The rise should continue in the coming months. "HCAI is likely to go up with the post-election spike in inter - est rates, as lenders may expand the credit box when origination volumes drop," according to the February Chartbook.