Archive for the 'Loan volume' Category
November 4th, 2009, 9:07 am by Mathew Padilla
The Mortgage Bankers Association today reported on the market last week:
- Its refinance application index increased 14.5 percent from the previous week and the purchase application index decreased 1.8 percent from one week earlier. I wonder if uncertainty about the future of the first-time buyer tax credit contributed to the drop in purchase demand. It appears Congress is moving closer to extending the credit into next year.
- The four-week moving average is down 5.0 percent for purchase index and down 5.7 percent for the refinance index.
- The refinance share of mortgage activity increased to 66.1 percent of total applications from 62.3 percent the previous week. The adjustable-rate mortgage share of activity decreased to 6.1 percent from 6.9 percent of total applications from the previous week.
- The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.97 percent from 5.04 percent, with points decreasing to 1.01 from 1.25 (including the origination fee) for 80 percent loan-to-value loans that can be sold to Fannie Mae or Freddie Mac.
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October 28th, 2009, 7:13 am by Mathew Padilla
The Mortgage Bankers Association reported today its indexes of loan application volume dropped last week even as interest rates dipped slightly (though fees increased).
Its refinance index decreased 16.2 percent from the previous week and the purchase index fell 5.2 percent from one week earlier.
The four week moving average for the overall market index is down 3.1 percent.
Here’s a graph of the purchase index (courtesy: Calculated Risk):
 - click to enlarge
And the average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value ratio loans that can be sold to Fannie Mae or Freddie Mac.
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October 5th, 2009, 6:08 pm by Mathew Padilla
 Randy Johnson, president of Independence Mortgage Co. in Newport Beach and the broker who regularly answers reader questions on this blog, sent out this note last week (note: he said fixed rates today are 4.625%):
Where is Everybody?
I look at the rate sheets today and I am almost astounded to see that 30 year fixed rate mortgages are back down to 4.5 percent. I wonder where everyone is. We just locked in one of those Jumbo Conforming loans that go up to $729,750 in high
housing cost areas at 5 percent. A 5/1 ARM is at 3.75 percent and you can even get a $1,000,000 5/1 loan for 4.75 percent.
These are terrific rates and last spring when rates were like this, we were working on Saturday to keep up with the frenzy. Where did everyone go?
The industry was busy last spring but there are millions of homeowners who didn’t refinance at that time. According to one government survey, about one-third of all homeowners who still have a mortgage could benefit from a refinance at anything below 5 percent.
Now I realize that there are problems out there. First, many people have no equity left. But both Fannie Mae’s Refi Plus and Freddie Mac’s Relief Refinance programs will allow you to refinance even if your home’s value has dropped to 80% of your loan amount. That means you loan is 25% greater than the value of your home, you can still refinance.
Johnson goes on, but I wanted to point out the tepid demand. What happens when the Fed stops buying Treasuries and mortgage securities and rates begin to rise?
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Posted in: Loan volume • Mortgage rates | 21 Comments »
September 30th, 2009, 7:35 am by Mathew Padilla
This could be just statistical noise or it could be a troubling sign for housing (or at least the bankers and brokers who make a living from housing): mortgage demand fell last week even as rates dipped a bit, reports the Mortgage Bankers Association.
The MBA’s index of loan application volume decreased 2.8 percent last week vs. the week before. At the same time, the average contract interest rate for 30-year fixed-rate mortgages slid to 4.94 percent from 4.97 percent, with points (fees) decreasing to 0.94 from 1.12 for folks borrowing 80 percent of the value of their house or condo.
The refinance index fell less than 1 percent, but the purchase index dropped 6.2 percent.
Things look a little better with the four-week moving average index, which could erase some of the noise. That index is down just 0.6 percent for purchase loans and is up 6.8 percent for refinances.
Here’s a chart showing the weekly and four-week purchase indexes (courtesy Calculated Risk):
 - click to enlarge
Calculated Risk, a popular economics blog, explains the rise in 2007 “was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007, even though activity was actually declining.” I believe the blogger means as some banks failed others picked up business, making demand look stronger than it was overall.
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Posted in: Loan volume • Mortgage rates • Q&A | 21 Comments »
August 26th, 2009, 11:38 am by Mathew Padilla
Bloomberg reports:
U.S. savings and loans reported the first profit in six quarters as lenders set aside less money for bad loans and collected additional fees from customers, the industry’s regulator said.
Profit of $4 million in the second quarter compares with a $1.62 billion loss in January through March, the first gain since the third quarter of 2007, the Office of Thrift Supervision said today in a quarterly report.
“The industry essentially broke even,” OTS Acting Director John Bowman said in Washington. “Despite some encouraging signs, the industry’s performance remained uneven. The bottom line is that the industry is not out of the woods yet.”
U.S. savings and loans posted cumulative losses of $18.1 billion in the six quarters ended March 31, reflecting declines in the value of real estate tied to the collapse of the subprime mortgage market. Eight thrifts have been forced to close, accounting for about 10 percent of 81 bank seizures this year.
The agency said 40 thrifts are considered to have problems, a 29 percent rise from 31 at the end of the first quarter and the highest total since the 1995’s fourth quarter. The companies aren’t identified. Regulators require a lender deemed to have problems to raise capital and improve earnings and liquidity.
Higher net interest margins helped boost profit, the agency said. Loan-loss provisions represented 1.71 percent of average assets in the quarter, down from 1.91 percent in the first quarter and 3.70 percent a year earlier.
Reserves of $4.7 billion, down from $14.1 billion a year earlier, are the sixth-highest and likely to remain elevated until home prices stabilize, employment improves and the inventory of unsold homes declines, the agency said.
High interest rate margins are a boon to the industry, but plenty more thrifts and banks are expected to fail as commercial real estate borrowers default.
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August 19th, 2009, 8:10 am by Mathew Padilla
Lately I am hearing jumbo home loans are staging a tepid comeback. Those are loans too big to be sold to Fannie Mae and Freddie Mac — their limit is about $729,000 in Orange County and $417,000 in cheaper markets.
I am skepitcal because banks are not able to hold many jumbo loans on their books and the loans have been difficult to sell. Investors have been buying only bonds backed by loans with government protection.
But Bonnie Sinnock of National Mortgage News had an interesting interview with Tom Millon, chief executive of Ponte Vedra Beach, Fla.-based Capital Markets Cooperative. Here’s a sample:
Jumbo whole loan participations are another option and could be a “baby step” back toward securitization, said Mr. Millon, whose group aims to help depositories tackle secondary mortgage market challenges. They don’t involve actual securitization in terms of pooling loans in an off-balance-sheet trust and divvying up their cash flows into officially rated tranches, but they do involve dividing up participations in an aggregated group of loans sold into a platform entity. The way these participations are divvied up is somewhat similar to senior-subordinate structures in the securitized market in that the senior participations are protected by others that are designated to absorb losses before the senior participations do.
“It’s old school,” he said. “It’s the way things were done way back before the securities market existed for this sort of thing.”
Whole loan participation efforts today in the jumbo market have been “slow going” and have not been a widespread practice, Mr. Millon said. But he said CMC is “cautiously optimistic” about them. “Banks are interested, and I would not have said that six months ago,” he said.
Sinnock interviewed another expert who talked about covered bonds, which are used in Europe. Unlike securitized bonds, covered bonds are held on the balance sheets of banks.
These are reasonable ideas, but we will have to see if any become common practice. I first heard people mentioning covered bonds when the market fell apart in 2007.
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Posted in: Loan underwriting • Loan volume • Meltdown • industry | 3 Comments »
August 5th, 2009, 8:13 am by Mathew Padilla
Reuters, citing the Mortgage Bankers Association, reports demand for U.S. home loans rose last week as a decline in 30-year fixed mortgage rates fell to a three-week low.
The MBA survey found average 30-year mortgage rates fell 0.19 percentage point to 5.17 percent for the week ended July 31, the lowest since 5.05 percent in the July 10 week.
The drop in borrowing costs pushed refinance applications up 7.2 percent, according to an MBA index.
Here’s more from Reuters:
Although the refi gauge has jumped 35 percent from its June low, it remains well below the 6,000 level that it had topped for five weeks around the time 30-year mortgage rates sank to a record low of 4.61 percent in March.
Purchase loan requests, which have been stuck in a narrow range for months, rose just 0.9 percent last week.
…
“Most folks are hopeful, based on all the numbers we’ve been seeing, that we’ve got a floor here and we’re going to start seeing a long, slow recovery,” said Jonathan Corr, chief strategy officer at Pleasanton, California-based mortgage software provider Ellie Mae.
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Posted in: Loan volume • Mortgage rates | 4 Comments »
July 27th, 2009, 7:46 am by Mathew Padilla
The Wall Street Journal reports today that lending continues to slow and that could be a bearish sign for the economy. Here’s more:
The total amount of loans held by 15 large U.S. banks shrank by 2.8% in the second quarter, and more than half of the loan volume in April and May came from refinancing mortgages and renewing credit to businesses, not new loans, an analysis by The Wall Street Journal shows.
The numbers underscore two related trends weighing on the economy. Financial institutions are clamping down on lending to conserve capital as a cushion against mounting loan losses. And loan demand is falling as companies shelve expansion plans and consumers trim spending to ride out the recession.
This is exactly why some economists have argued repeatedly over the past year that the government should take over big weak banks, just as it seizes smaller ones; sell the assets; and thus cleanse the banking system. Otherwise, some economists say, we can have zombie banks technically open for business but too weighed down by old toxic loans to make a lot of fresh new ones that will help the economy rebound.
An alternative view of the data is that in this weak economy there are simply fewer good credit risks.
And, clearly, many banks are now focused on making loans they can sell to Fannie Mae or Freddie Mac or loans insured by the Federal Housing Administration, which can also be sold. FHA, which barely existed in Orange County during boom times, now accounts for 20% to 25% of all home-purchase loans.
In any case, the Wall Street Journal reports some analysts think the loan portfolios of big banks won’t start growing until the second half of 2010.
Richard Davis, chief executive of U.S. Bancorp, said, “I think it is good for banks if we continue to be prudent as an industry and not reach to get loan growth by reducing our underwriting.” Sounds good to me. U.S. Bank bought assets and operations of failed Downey Savings & Loan in Newport Beach last year.
U.S. Bank’s overall loan portfolio declined 1.2% to $182 billion from March to June, despite issuing $16 billion of mortgages. Many of those mortgages were refinances of existing loans.
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Posted in: Bad debt • Bailout Buzz • Loan underwriting • Loan volume • Meltdown | 3 Comments »
June 24th, 2009, 7:27 am by Mathew Padilla
The Mortgage Bankers Association today said its index of mortgage application volume rose 6% last week vs. two weeks ago and 17.2% vs. the same period a year ago.
On a week-to-week basis the refinance index rose 5.9% and the purchase index jumped 7.3%. However, both indexes are well below their peak levels. The association also noted a dip in rates last week:
- “The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.44 percent from 5.50 percent, with points increasing to 0.99 from 0.89 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
- The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.93 percent from 4.99 percent, with points decreasing to 0.92 from 0.99 (including the origination fee) for 80 percent LTV loans.
- The average contract interest rate for one-year ARMs remained unchanged at 6.54 percent, with points increasing to 0.11 from 0.09 (including the origination fee) for 80 percent LTV loans.”
Only 4.1% of people applied for an adjustable-rate loan.
Economics blog Calcluated Risk has this interesting background on the purchase index:
The increase in 2007 was due to the method used to construct the index. Since the MBA surveyed mostly the major lenders, when lenders like New Century went under - this pushed more borrowers to lenders included in the survey. As smaller lenders went out of business, the remaining lenders saw more applications. Plus a number of borrowers started submitting multiple applications. Both factors distorted the index.”
Yes, the index can be misleading; look how it fooled Alan Greenspan.
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Posted in: Loan volume • Mortgage rates | 25 Comments »
May 24th, 2009, 3:00 am by Mathew Padilla
For the past five months, roughly one out of every four home buyers in Orange County used a federally run loan insurance program that was practically nonexistent here two years ago.
 Now home buyers are taking advantage of loans insured by the Federal Housing Administration. One reason: they can make a down payment as low as 3.5% and that can be gifted from a relative. Another reason: the limit was raised to nearly $730,000.
The chart (click on it for larger image) shows FHA market share of purchase loans per month — it was 24.2% in April, down a tad from 25.2% in March but nearly triple a year ago.
FHA has also taken off because brokers and lenders are pushing the program to consumers. When investors in 2007 stopped buying securities backed by mortgages with no government protections, lenders increased or switched to FHA loans and also began doing more loans that can be sold to Fannie Mae or Freddie Mac, which are both under federal receivership.
Under FHA, borrowers pay a fee, and those fees go into a pool which is used to compensate lenders if borrowers default. However, if the pool is inadequate to keep up with defaults, taxpayer money could be used to fill the gap.
I haven’t seen data on what percentage of Orange County purchase loans are being sold to Fannie or Freddie, but I would guess they are making up most of the other 75% of the market.
Our federal government is keeping Orange County’s housing market on life support. How long will this go on?
NOTE: FHA figures are from MDA DataQuick. I neglected to mention the company in my original post.
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Posted in: FHA • Loan underwriting • Loan volume • numbers | 18 Comments »
May 4th, 2009, 1:51 pm by Mathew Padilla
The Federal Reserve released today results from an April survey of loan officers. One key finding:
“Respondents indicated that demand for loans from both businesses and households continued to weaken for nearly all types of loans over the survey period, an exception being demand for prime mortgages, a category of loans that registered an increase in demand for the first time since the survey began to track prime mortgages separately in April 2007.”
And here are some highlights on underwriting standards:
- 40% of loan officers surveyed said their banks tightened credit standards on loans to businesses, down from 65% in January.
- 65% said they tightened standards on loans against commercial real estate vs. 80% in January.
- 50% said they tightened standards on prime residential mortgages, up slightly from January.
- 60% said they tightened standards on credit card loans, about the same as in January.
Read more HERE.
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Posted in: Fed • Loan underwriting • Loan volume • Meltdown • numbers | 4 Comments »
March 24th, 2009, 11:33 am by Mathew Padilla
The Mortgage Bankers Association today said it increased its forecast of mortgage originations for this year by $800 billion to total $2.78 trillion. Low interest rates are the cause.
2009 is seen as becoming the fourth highest origination year on record, the MBA said. Here’s more:
This boost is due entirely to the expected increase in mortgage refinancing activity motivated by the drop in interest rates following last week’s Federal Reserve’s announcement on the Treasury bond and mortgage-backed securities purchases programs and the Fannie Mae and Freddie Mac refinance programs. MBA lowered slightly its forecast of mortgage originations tied to home purchases.
“While the Fed has not announced that it is targeting specific rates for either 10-year Treasury rates or rates on 30-year fixed-rate mortgages, the effect of having the Fed bid in the market for a sustained period is enough to create a refinance incentive for a tremendous number of homeowners. The vast majority of mortgages originated before the latter part of 2008 are probably going to have at least a 50 basis point refinance incentive for at least the next several months, with mortgage rates hitting lows not seen since the early 1950s and late 1940s,” said Jay Brinkmann, MBA’s Chief Economist and Senior Vice President of Research and Economics.
The previous record origination years of 2002, 2003 and 2005 had large amounts of subprime loans and jumbo loans. In contrast, the 2009 originations will be almost entirely Fannie Mae and Freddie Mac-eligible loans, or eligible for FHA insurance.
The latest banking/lending stories …
… and OC housing …
… about homes in Surf City …
… and South County beaches:
Posted in: Loan volume | 3 Comments »
December 13th, 2008, 11:50 am by Mathew Padilla
Loan brokers accounted for 18.9% of all mortgages funded in the third quarter, the lowest since at least the late 1990s, according to a survey by National Mortgage News.
The decline fits with news that several large banks and thrifts have stopped working with brokers, especially on alternative mortgages.
However, small companies, dubbed “correspondents” in industry lingo, that make loans and then sell them to larger banks expanded market share to 35.6% of production in Q3, compared to a low of 29.2% two quarters ago.
Retail, when banks deal directly with consumers, accounted for the other 45.5%.
Paul Muolo, editor of NMN and co-author with me of the book “Chain of Blame,” told me brokers accounted for 30% of the business back in 2001. I had heard brokers had a much bigger market share and Muolo explained it this way (via email):
“In the old days when you heard that brokers had 70% of the business that number was misleading. The 70% figure applies to brokers and correspondents, the latter of which sell upstream. Why did the correspondent total go up? I don’t know but I would venture that the ’strong’ brokers that are left have enough capital to become mortgage bankers and are doing just that. They can’t keep the loans so they get a warehouse line and sell them at the closing. Technically, these correspondents are on the hook until the loan is bought but I would venture that in this market they would not be originating unless they have a ‘take out’ at the closing table. The largest correspondent buyers in 3Q were: Chase, BofA, Wells, and Citi. BofA inherited Countrywide’s correspondent business. Countrywide was usually the largest in this space.”
 Interesting. This begs a poll about the future of mortgage brokers…
Will brokers take back market share?
Posted in: Broker Corner • Loan underwriting • Loan volume • Polls | 21 Comments »
October 8th, 2008, 3:00 am by Ronald Campbell
Last year, 15 percent of American home loans were subprime. But subprime lenders’ market share was much, much higher in a handful of big counties.
With some glaring exceptions — Miami-Dade and Wayne County (Detroit) at the top of the list and Las Vegas, Philadelphia and Chicago a bit farther down — these mostly were suburban and exurban counties, places that gobbled up easy credit during the housing boom.
Orange County, home to most of the big subprime lenders, consumed little of what it grew. Just 12 percent of home loans by volume in O.C. were subprime last year. The county ranked 60th in subprime market share among the 87 U.S. counties with home loan volume of $5 billion or more.
Here are the top 10, with prime and subprime volume in billions of dollars. All figures are taken from the government’s Home Mortgage Disclosure Act (HMDA) database.
| Rank |
County |
Prime |
Subprime |
Total |
Percent subprime |
| 1 |
Miami-Dade, FL |
$16.9 |
$7.0 |
$24.0 |
29.3% |
| 2 |
Wayne, MI |
$4.2 |
$1.5 |
$5.6 |
26.1% |
| 3 |
Prince George’s, MD |
$8.9 |
$3.1 |
$12.0 |
26.0% |
| 4 |
Broward, FL |
$13.1 |
$4.4 |
$17.5 |
25.2% |
| 5 |
San Bernardino, CA |
$16.4 |
$4.8 |
$21.2 |
22.8% |
| 6 |
Essex, NJ |
$5.0 |
$1.4 |
$6.4 |
22.3% |
| 7 |
Orange, FL |
$8.4 |
$2.3 |
$10.7 |
21.2% |
| 8 |
Kern, CA |
$4.7 |
$1.2 |
$5.9 |
21.0% |
| 9 |
Lee, FL |
$5.7 |
$1.5 |
$7.1 |
20.9% |
| 10 |
San Joaquin, CA |
$5.0 |
$1.3 |
$6.3 |
20.4% |
Continue reading to see the list of 87 counties with home loan volumes of $5 billion or more.
Read the rest of this entry »
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