Mortgage originations plummet as refis drop by 34%

Mortgage originations for residential loans fell 19% year-over-year in the fourth quarter of 2017, due primarily to a large drop in refinance volume, according to Attom Data Solutions.

Over 1.9 million loans secured by residential property were originated in the quarter, with 818,158 of them being refinanced loans. Refinance loan originations were down 34% from the previous year and 17% from the previous quarter. And with mortgage rates expected to increase this year, refinancing may look even less appealing and that would eliminate more potential candidates.

The number of purchase loans originated held pretty steady on an annual basis. In the fourth quarter, 791,637 purchase loans were originated, down only 1% year-over-year, but down 22% quarter-over-quarter.

By a number of loans, Quicken Loans ended the quarter as the nation’s most prolific mortgage originator, with 289,349 units (of which 213,227 were refis). Wells Fargo was second in terms of units at 245,643 (145,158 refis), but was top by dollar volume, at $80.4 billion to Quicken’s $64.5 billion.

About 293, 570 home equity lines of credit were originated in the fourth quarter, down 25% from a nine-year high in 3Q17, and down 7% from the year prior.

“The falloff in refinance originations continued for the third straight quarter, but purchase originations held steady compared to a year ago despite ballooning down payment amounts that make it more difficult for first-time homebuyers to compete — as evidenced by the three-year low in the share of FHA buyers,” said Daren Blomquist, senior vice president at Attom Data Solutions, in a press release.

The median down payment for single-family homes and condos purchased with financing fell from a record high of 19,100 in the third quarter to 18,000 in the fourth quarter. Despite falling on a quarterly basis, it was still up 20% from $14,950 in the fourth quarter of 2016.

Residential loans backed by the Federal Housing Administration made up 12% of all residential loans originated in the fourth quarter, down 12.3% year-over-year and 12.9% quarter-over-quarter.

“While the rise in construction loans in part reflects homeowners reconstructing in the wake of Hurricane Harvey in southeast Texas, the widespread rise in construction loans in other parts of the country indicates that more homeowners are staying put and remodeling rather than trying to move up into another home that comes with a big down payment and probably a higher mortgage interest rate,” Blomquist said.

Construction loans backed by residential real estate grew 33% to 29,357 in the fourth quarter.

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