Ahead of Uncertainty, 3Q Home Refi Originations Up 16%

Enjoy it while you can, you refinancers. ATTOM Data Solutions, Irvine, Calif., said even though housing finance is shifting to a purchase market, refinancings increased in the third quarter ahead of real and projected mortgage interest rate hikes.

The company’s Q3 U.S. Residential Property Loan Origination report showed more than 1.9 million home loans originated on residential properties, down by 2 percent from the second quarter but up by 1 percent from a year ago. Dollar volume of loan originations increased by 8 percent from a year ago to more than $502 billion, primarily from higher average loan amounts.

And while purchase originations fell by 11 percent from a year ago and home equity line of credit fell by 6 percent, refinance originations jumped. ATTOM reported 876,633 refinance loans secured by U.S. residential properties in the third quarter, up 7 percent from the previous quarter and up 16 percent from a year ago. The year-over-year increase in refinance originations followed two consecutive quarters of year-over-year decreases. Refinance originations accounted for 45.7 percent of all loan originations in the third quarter, up from 42.1 percent in the previous quarter and up from 39.5 percent a year ago.

“Uncertainty surrounding the outcome of the presidential election may have kept some would-be homebuyers on the sidelines while the prospect of rising interest rates following the election may have prompted many homeowners to refinance to lock in low interest rates,” said Daren Blomquist, senior vice president with ATTOM.

The Mortgage Bankers Association this week said 30-year fixed mortgage interest rates rose to their highest level since July 2015, 4.23 percent, from 4.16 percent, with points increasing to 0.41 from 0.39 (including origination fee) for 80 percent loan-to-value ratio loans. MBA reported other key interest rates reached 14-month highs as well.

ATTOM reported among 101 metropolitan statistical areas with at least 1,000 loan originations in Q3 2016, those with the biggest year-over-year increase in refinance originations were Oxnard-Thousand Oaks-Ventura, Calif. (up 74 percent); San Diego (up 73 percent); San Jose, Calif. (up 65 percent); Honolulu (up 64 percent); and Provo-Orem, Utah (up 63 percent). Other metro areas with a year-over-year increase in refinance originations of at least 50 percent included Seattle (up 56 percent); Portland, Ore. (up 54 percent); Boulder, Colo. (up 53 percent); Madison, Wis. (up 52 percent); and Phoenix (up 51 percent).

On the flip side, ATTOM reported 743,880 purchase loans in the third quarter, down 8 percent from the previous quarter and down 11 percent from a year ago. Prior to Q3 2016, purchase originations had increased on a year-over-year basis for nine consecutive quarters going back to Q2 2014. Purchase originations accounted for 38.8 percent of all loan originations in the third quarter, down from 41.4 percent in the previous quarter and down from 43.8 percent a year ago.

ATTOM reported 298,667 HELOC originations in the third quarter, down by 7 percent from the second quarter and by 6 percent from a year ago, following 17 consecutive quarters of annual increases. HELOC originations accounted for 15.6 percent of all loan originations in the third quarter, down from 16.5 percent in the previous quarter and down from 16.7 percent a year ago.

The report cited 143,366 loans backed by the U.S. Department of Veterans Affairs loans were originated in the third quarter, up 2 percent from the previous quarter and up 26 percent to a year ago to the highest level as far back as data was tracked in the report (Q1 2006). VA loans originated in Q3 2016 accounted for 8.8 percent of all loans originated during the quarter, up from 8.6 percent the previous quarter and up from 7.1 percent a year ago to the highest share of VA loans since Q1 2006.

ATTOM also reported 266,404 loans backed by FHA in the third quarter, down 7 percent from the previous quarter and down 15 percent from a year ago, accounting for 16.4 percent of all loans originated during the quarter, down from 17.6 percent the previous quarter and down from 19.8 percent a year ago to the lowest share since Q1 2015.