2Q Mortgage Lending Slows Amid Refi Retreat

(Chart courtesy ATTOM, Irvine, Calif.)

The second quarter of any year is usually the strongest for mortgage lending, but not this past quarter, according to ATTOM, Irvine, Calif.

The company’s second-quarter U.S. Residential Property Mortgage Origination Report showed 3.78 million mortgages originated, up 29 percent from a year ago, but down 3 percent from the first quarter. The quarterly decline marked the first time since early in 2020 that the total number of home mortgages issued in the U.S. decreased and – more notably – the first time that happened from a first-quarter to a second-quarter period since 2011.

The report noted with residential mortgage interest rates dropping back below 3 percent for most 30-year fixed-rate purchase and refinance loans, lenders issued $1.18 trillion worth of mortgages in the second quarter. That also was up annually, by 39 percent, but down quarterly, by 1 percent. The rare quarterly drop-off came as a decrease in refinance activity canceled out a rise in home-purchase and home-equity lending.

ATTOM said lenders refinanced 2.23 million home loans in the second quarter, up 26 percent from a year earlier, but down 15 percent from the first quarter of this year. The last quarterly decrease in refinancing activity came in early 2020, while the last time the number dropped from a first quarter to a second quarter was in 2017. The second-quarter dollar value of refinance loans rose annually, by 26 percent, but went down quarterly, by 15 percent, to $674.7 billion.

The report noted refinance mortgages still accounted for a majority of all home-lending activity during the second quarter. But the portion dipped from 67 percent to 59 percent, the biggest downward change in four years. This offset a spike in the number of purchase loans issued in the second quarter to 1.32 million – a 52 percent annual and 22 percent quarterly rise. The dollar value of loans taken out to buy a property jumped to $465.5 billion, a 77 percent gain over the second quarter of last year and a 31 percent increase from the first quarter.

Home-equity lines of credit also rose from the first to the second quarter, to 225,000. That number, while down annually by 18 percent, was up quarterly by 18 percent. The increase marked the first quarterly rise in HELOC activity since third quarter 2019.

“The demand for home loans across the country shifted significantly in the second quarter as refinancing activity receded and home-purchase and equity loans increased. We haven’t seen that pattern for several years,” said Todd Teta, chief product officer at ATTOM. “The big increase in households looking to buy surely had a lot to do with that. And we may be getting to the point where so many homeowners have refinanced that the need for those deals is tapping out. We will see whether this is a momentary blip or a real trend over the next few months, which looks to be a really key period for the lending industry.”

Other report findings:

–Banks and other lenders issued 3,776,180 residential mortgages in the second quarter, up 29.3 percent from 2,919,473 a year ago but down 2.9 percent from 3,887,739 in the first quarter. The $1.18 trillion dollar volume of all loans in the second quarter remained up 38.9 percent from $853.3 billion a year earlier but was down 0.6 percent from $1.19 trillion in the first quarter.

–Overall lending activity decreased from the first quarter to the second quarter in 101, or 46.3 percent, of the 218 metropolitan statistical areas around the country.

–Lenders issued 2,230,263 residential refinance mortgages in the second quarter, up 25.5 percent from 1,776,709 a year ago but down 14.8 percent from 2,617,243 in the first quarter. The $674.7 billion dollar volume of refinance packages in the second quarter of 2021 was up 25.7 percent from $536.5 billion a year earlier, but down 15.4 percent from $797.6 billion in the first quarter.

–Refinancing activity decreased from the first quarter to the second quarter of 2021 in 179, or 82.1 percent, of the 218 metropolitan statistical areas around the country with enough data to analyze.

–Lenders originated 1,320,677 purchase mortgages in the second quarter, up 22.4 percent from 1,079,032 in the first quarter and 52.4 percent from 866,782 a year ago. The $465.5 billion dollar volume of purchase loans in the second quarter was up 30.9 percent from $355.7 billion in the prior quarter and up 77 percent from $263 billion a year earlier.

–Residential purchase-mortgage originations increased from the first quarter to the second quarter in 197 of the 218 metro areas in the report (90.4 percent).

–225,240 home-equity lines of credit (HELOCs) were originated on residential properties in the second quarter, down 18.4 percent from 275,892 during the same period last year, but up 17.6 percent from 191,464 in the first quarter. Dollar volume of HELOC loans went up 15.7 percent, measured quarterly, to $44.7 billion, although that was still down 16.8 percent from the second quarter of 2020. HELOC mortgage originations increased from the first to the second quarter in 73.2 percent of metro areas analyzed for this report.

–Mortgages backed by the Federal Housing Administration accounted for 362,618, or 9.6 percent of all residential property loans originated in the second quarter. That was up from 8.8 percent in the first quarter and 9.4 percent a year ago.

–Residential loans backed by the U.S. Department of Veterans Affairs accounted for 263,026, or 7 percent, of all residential property loans originated in the second quarter 1, down from 8.4 percent in the previous quarter and 8.8 percent a year ago.

–The national median down payment, amount borrowed and the ratio of down payment to median home price during the second quarter all hit or tied high points since at least 2005. Median down payments on residential properties purchased with financing in the second quarter stood at $25,000, up 35.1 percent from $18,500 in the previous quarter. The median down payment of $25,000 represented 7.4 percent of the median sales price for homes purchased with financing during the second quarter of 2021, up from 6.1 percent in the previous quarter and 5 percent a year earlier.