According to Black Knight’s Mortgage Monitor, a surge in refinance lending driven by record-low rates lead to the largest quarterly volume on record.
Key Points
- Q2 2020 saw the largest quarterly origination volume on record with nearly $1.1 trillion in first lien mortgages originated in the quarter
- More than 2.3M refinance loans were originated in Q2 2020, the highest such volume
in nearly 17 years - Refinance lending was up more than 60% from Q1 2020 and more than 200% from the same time last year, accounting for nearly 70% of all first lien originations by dollar value
- Rate lock data – a leading indicator of lending activity – supports the growing consensus that the spring homebuying season was shifted forward into the summer months by the COVID-19 pandemic
- Overall, purchase locks scheduled to close in Q3 are now 23% above the seasonal expectation, more than making up for Q2’s COVID-19-related shortfall, with Q2 and Q3 combined more than 6% above their expected seasonal volumes based on January’s pre-pandemic baseline
- Locks on refinance loans that are expected to close in the third quarter (assuming a 45-day lock-to-close timeline) are up 20% from Q2 suggesting that Q3 2020 refi volumes could be even higher than the record-setting Q2 volume
- Despite a nearly 17-year high for refinance originations, just 22% of rate/term refinance and 13% of cash-out refinance borrowers were retained in servicers’ portfolios
- Delinquencies were down 8.9% but serious delinquencies rose 20%.
Points 7-8 are interesting.
These loans were all securitized or dumped on GSEs putting taxpayers at risk of another bailout.
Mortgage Delinquencies
- 30-day delinquencies hit their lowest level on record in July 2020, dating back to the turn of the century
- Both 60- and 90-day delinquencies remain elevated, with 250K more 60-day delinquencies and 1.84M more 90-day delinquencies than there were in February 2020
Active Forbearance Plans
Although those in active forbearance plans trickles lower, the surge in serious delinquencies represents those who have not returned to work.
Black Knight comments “Forbearance starts have shown little impact from the reduction in expanded
unemployment benefits thus far.”
Perhaps not, but what about serious delinquencies?
The Fed Now Owns Nearly One Third of All US Mortgages
In case you missed it, please note The Fed Now Owns Nearly One Third of All US Mortgages.
Mish
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Americans became very familiar with the rules of the housing scumbag game the last time around. If they didn’t do it themselves, they knew someone who did and “got away with it”. The amount of walk-aways in 2022? is going to be biblical. Let’s see if all the (immoral) “rescue” operations (and executive orders) are going to be able to keep pace with the burn-rate.
I think March was just a head fake to what is coming. If inflation picks up bond markets are going to freak out all the while China is going to be start selling to help jack up interest rates. The fed knows there are limits coming and things could get very dicey soon.
What would the housing markets look like with a 7% 30 years fixed?
A couple scenarios are:
House prices would trend down for a while until a government program is implemented “to help people” with the high interest loans.
House prices trend down quickly as those who are underwater walk away. Prices would continue to slide until the walk-aways and first time buyers enter the market due to affordability. A blind eye is turned to the walk-aways and the banks that get burned get bailed out, so there is effectively a “reset” to the housing game. Just those who paid the inflated prices and refuse to walk away (because of some rare condition called “integrity”) get screwed.
Oh yes, people became very familiar with the rules of the housing scumbag game the last time around. If they didn’t do it, they knew someone who did. The amount of walk-aways is going to be biblical. Let’s see if all the (immoral) “rescue” operations are going to be able to keep pace with the burn-rate.
7% interest rates would rock the world. It is near the unfathomable to think about. My first home loan was more than that. Seems very strange today.
Would you rather a stick you money in a CD yielding 4.75% or gamble on the stock market? Investors would also dump rentals because rental payoff is nearly 15 years at this point if everything goes perfectly. Deflationary Inflation setup. Stagflation.
June 2020 Loan Performance: Serious Delinquencies Spike as Financial Pressures Build for Homeowners http://econintersect.com/pages/releases/release.php?post=202009080701
I suppose, if one is sufficiently retarded to be appointed to a decision making position at the central bank of The Retarded States of Idiotopia, it makes all the economic sense in the world, that whenever credit risk is increased, interest rates should be lowered……….
“More than 2.3M refinance loans were originated in Q2 2020, the highest such volume in nearly 17 years”
…
Q3 will likely be good, too … then .., it ends.
FHFA instituting December 1st a half point fee on refinances (with some loopholes) to beef up capital in advance of forbearance losses.
The state polling map looks worse for Trump today. Arkansas, Iowa and Montana now move into swing state territory. They join Texas, Georgia, Florida, North Carolina and Ohio. 143 electoral votes in the tossup category. Trump is nowhere near the 2016 electoral map at this point at the same time. The only positive is Minnesota flipping to a swing state. Texas Democrats found 1M unregistered voters who were mostly Latino and between the age of 18 and 21.
Watch the stock market for election direction. If the markets are up more than 20% starting in year two of an incumbent’s term, then the incumbent has a better than 85% chance of being re-elected. A few days ago, Trump barely had that 85% chance. Now the chances are diminishing, but still favorable for Trump. Markets would have to drop 10-15% from here to favor Biden.
Markets: “hold my beer and watch this!”
big banks are probably pushing the activity. they get the fees on a refi and the risk is all with the GSE’s. Most likely a bifurcated market on the purchase side with so many out of work.
But not every borower is being savvy. If the old rate was only a little better and they have to pay a recording tax they may not benefit for quite a while
I’m refinancing for 1% less. Then again my credit score is above 800.
ruined my score years ago. Did dumb things like paying off my mortgage, locking my credit, not taking out a HELOC and saving money. Went from 800 to 730. Pay my credit cards in full each month and haven’t taken out a new card in decades.
Forbearance one reason credit tightening.
CARES Act stipulated that those who requested forbearance wouldn’t have that info forward to credit score companies (in some cases that info was given). As a lender, if you don’t know if potential borrower in forbearance, you tighten … for everyone.
Black Knight comments “Forbearance starts have shown little impact from the reduction in expanded unemployment benefits thus far.”
…
Starts? Now? Everyone and their Mother took forbearance back in Q2 if they were potentially at risk from recession. THE question is how many still in? Especially, if they re-extended? My guess, most who re-extended forbearance won’t be able to exit intact. What is that number?
“Of the 3.9M homeowners still in forbearance, 2.85M have had the term of their
forbearance plan extended while 1.07M still remain in their original term”