U.S. Residential Loan Originations Decrease 14 Percent in Fourth Quarter Driven by 24 Percent Drop in Purchase Loans

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The FINANCIAL — RealtyTrac on February 18 released its Q4 2015 U.S. Residential Property Loan Origination Report, which shows 1.6 million (1,552,329) loans were originated on residential properties (1 to 4 units) in the fourth quarter of 2015, a 14 percent decrease from the previous quarter but still up 1 percent from a year ago.

The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by RealtyTrac in more than 950 counties accounting for more than 80 percent of the U.S. population.

The 14 percent quarterly decrease was fueled primarily by a 24 percent quarter-over-quarter decline in purchase originations — the biggest quarterly drop in purchase originations in more than five years, since the third quarter of 2010. Purchase originations accounted for 38.8 percent of all originations in the fourth quarter, while refinance originations accounted for 42.8 percent and Home Equity Line of Credit (HELOC) originations accounted for 18.5 percent. Refinance originations were down 7 percent from the previous quarter but were still up 2 percent from a year ago, while HELOC originations were also down 7 percent from the previous quarter but were still up 7 percent from a year ago, according to RealtyTrac.

“The 24 percent drop in purchase originations in the fourth quarter of 2015 was well above the average 15 percent seasonal slump in the fourth quarter over the past 10 years,” said Daren Blomquist, vice president at RealtyTrac. “New mortgage rules implemented at the beginning of October likely contributed to the decrease, but weakness in some local economies could also be contributing to the decrease, most notably in oil producing markets such as Houston and Oklahoma City, both of which saw purchase originations decrease by double-digit percentages both quarterly and annually.”

All 65 metropolitan statistical areas with at least 5,000 loan originations in the fourth quarter posted a quarterly decrease in purchase loan originations, while 31 of the 65 metros (48 percent) posted year-over-year declines in purchase originations, led by Raleigh, North Carolina, (down 41 percent); Omaha, Nebraska (down 21 percent); Cincinnati, Ohio (down 21 percent); Richmond, Virginia (down 20 percent); and Austin, Texas (down 17 percent).

“Primary causes of the decrease were lending institutions embracing new TRID guidelines implemented in October, as well as abnormally low listing inventories across the country,” said Michael Mahon, president at HER Realtors, covering the Ohio markets of Cincinnati, Dayton and Columbus. “We would expect Ohio markets to bounce back quickly this year due to a growing jobs market in many areas of the state, which has led to increased activity of millennial demographic home purchasers finding Ohio communities with attractively valued homes for taking advantage of FHA loan products.”

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Among the 65 metro areas with at least 5,000 loan originations in the fourth quarter, those with the biggest year-over-year increase in purchase loan originations were led by Nashville, Tennessee (up 79 percent); Knoxville, Tennessee (up 41 percent); Memphis, Tennessee (up 30 percent); Providence, Rhode Island (up 25 percent); and Albuquerque, New Mexico (up 18 percent).

“Total loan originations in Seattle are higher when compared to a year ago largely because of an increase in refinance activity,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where refinance originations increased 8 percent from a year ago and Home Equity Line of Credit (HELOC) originations increased 33 percent from a year ago. “The rapid rise of home prices combined with historically low interest rates continues to drive many Seattle-area homeowners to refinance.

“The decline in purchase originations in the fourth quarter is not surprising and is primarily a function of seasonality,” Gardner continued, explaining the 27 percent quarterly drop in Seattle purchase loan originations. “Home sales simply slow down over the holidays. Furthermore, the Seattle housing market continues to suffer from the lowest inventory levels I’ve seen in almost two decades. As a result, we saw a drop in home sales during fourth quarter, which therefore caused purchase originations to fall as well. ”

Markets with the biggest year-over-year increase in refinance originations were Nashville, Tennessee (up 80 percent); Knoxville, Tennessee (up 46 percent); Memphis, Tennessee (up 31 percent); Denver (up 28 percent); Grand Rapids, Michigan (up 25 percent); Cape Coral-Fort Myers, Florida (up 23 percent); Portland, Oregon (up 21 percent); Des Moines, Iowa (up 19 percent); Tulsa, Oklahoma (up 19 percent); and Albuquerque, New Mexico (up 19 percent).

“The quarterly drop was mainly caused by four factors,” said Joe Jackson, with Home Mortgage Alliance a joint venture with RE/MAX Alliance, covering Colorado, where purchase originations were down 3 percent year-over-year, counter to the 28 percent annual increase in refinance originations. “Those four factors were 1) seasonal swing, 2) TRID implementation, 3) low home-for-sale inventory, and 4) new home formations in multi versus single family housing. The first is to be anticipated each year, the second is a one-time event and may impact the first quarter but not the future, while the third and fourth are more unknowns. The low inventory could be helped in the short run by a low interest rate or rising rate, but longer term we see a shift out of multi-family into single family to give the purchase mortgage business a lift in that area.”

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FHA origination share drops for second straight quarter

After reaching a five-year high of 20.1 percent in the second quarter of 2015, the share of Federal Housing Administration (FHA) loan originations decreased for the second consecutive quarter in Q4 2015. FHA loan originations accounted for 17.8 percent of all loan originations during the quarter, down from 19.9 percent in the previous quarter, but still up from 15.0 percent in the fourth quarter of 2014.

Share of big bank originations decline, non-bank origination share soars

Among the top 10 loan originators in terms of number of loan originations in the fourth quarter, those with an increase in share of originations compared to a year ago were Caliber Home Loans (up 61 percent); LoanDepot (up 52 percent); Freedom Mortgage (up 40 percent); Guaranteed Rate (up 18 percent); and Quicken (up 10 percent).

Meanwhile top 10 originators with the biggest decline in share of originations compared to a year ago were JP Morgan Chase (down 30 percent); Bank of America (down 27 percent); US Bank (down 13 percent); and Wells Fargo (down 8 percent).

Data Licensing and Custom Report OrderReport methodology

RealtyTrac analyzed recorded mortgage and deed of trust data for single family homes, condos, town homes and multi-family properties of two to four units for this report. Each recorded mortgage or deed of trust was counted as a separate loan origination. Dollar volume was calculated by multiplying the total number of loan originations by the average loan amount for those loan originations.


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