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September 8, 2020 | The Largest Mortgage Origination Volume on Record

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Record low interest rates led to a surge in mortgage refinance originations.
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 

  1. Q2 2020 saw the largest quarterly origination volume on record with nearly $1.1 trillion in first lien mortgages originated in the quarter
  2. More than 2.3M refinance loans were originated in Q2 2020, the highest such volume in nearly 17 years
  3. 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
  4. 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
  5. 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
  6. 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
  7. 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
  8. 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

Mortgage Delinquencies by Severity
  • 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

Active Forbearance Plans 2020-08

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.


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September 8th, 2020

Posted In: Mish Talk

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