MReport July 2017

TheMReport — News and strategies for the evolving mortgage marketplace.

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40 | TH E 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 ORIGINATION THE LATEST Purchase Originations, Refis in Freefall New data shows purchase loans have fallen 45 percent since the end of 2016. B oth mortgage origina- tions and foreclosures are in freefall, according to the recent Mortgage Monitor report released by Black Knight Financial Services. Overall originations dropped 34 percent over the first quarter of the year, while foreclosure starts hit a 12- year low of just 52,800. Though purchase loans and refinances took a hit during Q1, refis saw the steepest drop, falling 45 percent since the end of 2016 and 20 percent over the last year. According to Ben Graboske, EVP of Data & Analytics at Black Knight, this drop in refinances was no surprise. "As expected, the decline was most pronounced in the refinance market, which saw a 45 percent de - cline from Q 4 2016 and were down 20 percent from last year," Graboske said. "They also made up a smaller share of overall originations than in the past; just 45 percent of total Q1 originations were refinances vs. 54 percent in Q 4 2016." Purchase originations were down 21 percent over the quarter, though up slightly over the year at 3 percent higher than 2016's numbers. "Purchase lending was up year- over-year, but the 3 percent annual growth is a marked decline from Q 4 2016's 12 percent and marks the slowest growth rate Black Knight has observed in more than three years—going back to Q 4 2013," Graboske said. "At that point in time, interest rates had risen abruptly—very similarly to what we saw at the end of 2016— and originations slowed consid - erably. The same dynamic is at work here." Though the decline of both numbers is worrisome, according to Graboske, it's the lower credit scores of borrowers that should have the industry on edge. "Not only are refinances—which generally tend to outperform purchase mortgages—making up a smaller share of the market, but there's also been a net lowering of average credit scores as well," Graboske said. "The average Q1 2017 refinance credit score was 742, down from 751 in Q 4 2016, and the lowest average credit score since Q 3 2014. Both of these factors could have a dampening factor on mortgage performance, holistically speaking." As for foreclosures, April marked the lowest month on re - cord for first-time foreclosure starts with just 24,200 for the month. Repeat foreclosures also dropped, hitting their lowest point since April 2008. The total delinquency rate for the month was 4.08 percent, with foreclosure presale inventory dropping 3.47 percent. The states with the highest share of delinquent loans were Mississippi, Louisiana, Alabama, West Virginia, and Maine. Q1 Reports Bode Well for Credit Unions The institutions saw rises in membership, assets, and lending in a big start to 2017. A s both current home- owners and potential homebuyers are set- tling more into their prospective communities, turning to federally insured credit unions for their mortgage and banking needs has become a viable option. According to the National Credit Union Administration (NCUA) 2017 Q1 Call Report data, which reports growth all across the board for federally insured credit unions, community credit unions are growing. Dan Berger, President and CEO of the National Association of Federally-Insured Credit Unions (NAFCU), said the overall growth is first and foremost a result of growing membership, which rose 4.2 percent—and 4.3 million mem - bers—over the year. "The figures show that credit unions' consistent commitment to providing excellent products and member service is being recognized by members," Berger said. "Credit unions are maintaining healthy growth by focusing on their mem - bers' needs and concerns. Credit unions succeed when their mem- bers succeed; this quarterly report is just more proof of that." And succeed they did, as the NAFCU saw a steady climb in all of its reported data. Assets were up 7.8 percent to $1.34 trillion—$0.1 trillion more than last year—and lending climbed to $885 billion from $800 billion (10.6 percent). Member business lending also rose to $68.9 billion (15.3 percent). Deposits, or shares, grew 8.3 percent to $1.14 trillion, and the loan-to-share ratio for the industry increased 1.7 percent from a year prior to 77.7 percent. Net income of the credit unions also was up 2.6 percent in comparison to first quarter 2016, totaling $9.4 billion annualized. Finally, net worth appreciated 6.9 percent to $143.1 bil - lion from $133.8 billion a year ago.

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