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Archive for the 'Loan volume' Category

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Mortgage demand softens

February 1st, 2010, 4:13 pm by Mathew Padilla

Demand for real estate loans has dipped in recent months, according to the Federal Reserve’s survey of lenders.

And some banks continued to tighten loan standards on property lending, while banks are mostly done turning the screws on other types of loans. Here’s a clip (bold added):

Banks continued to tighten standards on residential real estate loans over the past three months. In line with recent patterns, a small net fraction of banks tightened standards on prime residential real estate loans over that period, and somewhat larger net fractions of banks tightened standards on nontraditional residential real estate loans. In addition, a moderate net fraction of banks reported weaker demand from prime borrowers for residential real estate loans. Demand from customers seeking nontraditional mortgages also weakened further over the survey period. Only a small net fraction of banks reported having tightened standards on revolving home equity lines of credit over the past three months, but a large net fraction of banks continued to report lower demand for such loans.

Read the survey HERE.

Posted in: Fed • Loan volume | Post a Comment »

Refinancings “choked off” amid higher rates

January 13th, 2010, 1:00 am by Mathew Padilla

A gloomy outlook from the Mortgage Bankers Association on refinancing but a glimmer of hope on purchase activity, reports National Mortgage News:

The Mortgage Bankers Association believes residential originations will fall to just $1.28 trillion in 2010 — a 33% decline from last year and the industry’s worst year since 2000. In early December, the trade group had forecast loan production of $1.5 trillion but lowered its estimate Tuesday morning. (According to National Mortgage News, the industry funded $1.9 trillion in 2009.) The MBA now believes 30-year FRMs will average 5.8% this year and recent increases in rates have already “choked off” refinancings. Refis will fall to $166 billion in the first quarter compared to $363 billion in 4Q. However, home sales will see a steady improvement. “We do expect purchase originations in 2010 to be about 5% higher than in 2009,” MBA chief economist Jay Brinkmann told reporters. A few months back veteran mortgage analyst David Olson of Access Research said some large lenders were bracing for just $1 trillion in production for 2010. Despite the poor outlook on originations, many mortgage lenders are continuing to earn strong profits (thanks to the wide yield curve). The profit picture also improved, in part, because of a lack of competition. In 2000 mortgage bankers funded just over $1 trillion in new loans.

Of course, mortgage industry folks have shifted to darker views … perhaps to encourage continued government intervention?

Posted in: Loan volume • Mortgage Demand • Refi | 18 Comments »

Mortgage purchase applications at 12-year low

January 6th, 2010, 11:26 am by Mathew Padilla

An index of nationwide applications for home-purchase loans has been trending down since mid October amid an uptick in interest rates, according to the Mortgage Bankers Association.

Here’s a graph, courtesy of blog Calculated Risk, showing the four-week moving average is at the lowest level since November 1997.

click to enlarge
click to enlarge

The index suggests future home sales could dip across the country. However, there are a significant number of all-cash buyers these days (I have heard in the range of 20% in Orange County).

And last week the average contract interest rate for 30-year fixed-rate mortgages increased to 5.18% with points decreasing to 1.28%, compared to the week before of 5.08% and points of 1.48%. That’s for folks putting 20% down and getting a loan that can be sold to Fannie Mae or Freddie Mac.

So rates are back above 5% and climbing.

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Posted in: Loan volume • Mortgage Demand • Mortgage rates | 6 Comments »

Mortgage volume to tank 30% next year

November 18th, 2009, 1:00 am by Mathew Padilla

A mixed forecast courtesy of National Mortgage News:

Residential originations will decline by almost 30% next year to $1.38 trillion as rising interest rates put a crimp on new originations, according to a new forecast from Fannie Mae. The GSE believes originations will total $1.95 trillion this year. (The Quarterly Data Report, a National Mortgage News publication, is forecasting $2.1 trillion in fundings this year.) Last month the Mortgage Bankers Association reduced its 2010 forecast to about $1.6 trillion. … Fannie’s economists predict the interest rate on 30-year fixed-rate loans will average 5.42% in 2010 compared to 5.07% this year. Refinancings will comprise only 47% of originations, compared to 67% this year. “We continue to expect a 10% increase in home sales in 2010,” Fannie chief economist Doug Duncan says in his monthly “Economic Developments” update report. He believes FHA will be the beneficiary due to congressional action to extend the first-time homebuyer tax credit and expand it to buyers in the move-up market. “The tax credit will likely be a boon for the Federal Housing Administration, whose share of purchase mortgages has increased significantly during the past year,” he said. FHA insured $170.6 billion in purchase mortgages in fiscal-year 2009 with 78.5% going to first-time homebuyers.

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Posted in: Fannie & Freddie • Loan volume | 13 Comments »

Fewer banks tighten standards

November 9th, 2009, 2:59 pm by Mathew Padilla

Bloomberg reports:

Fewer U.S. banks tightened lending standards for companies and consumers in the third quarter as the economy grew for the first time in more than a year, a Federal Reserve survey showed.

Demand for most types of loans weakened at a smaller number of banks than in the second quarter, the Fed also said today in its quarterly Senior Loan Officer survey. For prime residential mortgages, a larger number of banks reported stronger demand, the central bank said.

The report helps explain why Fed policy makers last week said “tight credit” remains a drag on the economy and pledged to keep their benchmark interest rate near zero for an “extended period.” JPMorgan Chase & Co. is among the banks that have reduced lending in response to stricter underwriting standards for consumer loans and lower demand among companies.

“It will be helpful if the banks were more prepared to lend, because there are creditworthy borrowers that are having difficulty getting credit,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said in an interview on Bloomberg Television.

Separately, the Fed said today that nine of 10 bank holding companies deemed short of capital in May have raised their reserves enough to withstand the risk of higher unemployment and slower economic growth.

The survey of loan officers at 57 U.S. banks and 23 U.S. branches of foreign banks was conducted from about Oct. 6 to Oct. 20. Read it HERE.

Bloomberg, citing a separate Fed release, reported loans and leases held by U.S. commercial banks have declined for 10 straight months, falling to $6.7 trillion as of Oct. 28 from $7.2 trillion at the end of 2008.

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Posted in: Credit Crunch • Credit stats • Loan underwriting • Loan volume | 1 Comment »

Refi demand up, purchase down on drop in rates

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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Posted in: Loan volume • Mortgage Demand • Mortgage rates | Post a Comment »

Mortgage applications drop

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
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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Posted in: Loan volume | 6 Comments »

Where are the mortgage takers?

October 5th, 2009, 6:08 pm by Mathew Padilla

randy-johnson.jpgRandy 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 »

Mortgage demand falls despite lower rates

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
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 | 22 Comments »

Thrifts earn first profit since 2007

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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Posted in: Loan volume • Meltdown • Rebound | Post a Comment »

Are big home loans coming back?

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 • | 3 Comments »

Loan refinance demand rises

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 »

Lending still depressed. Bad sign for economy?

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 »

Mortgage applications rose on dip in rates

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.

In other news…

Posted in: Loan volume • Mortgage rates | 25 Comments »

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