Government Share of Originations Remained Steady
CoreLogic public records data shows that the dollar volume of all mortgages – purchase and refinance combined – originated[1] in 2016 was nearly $2 trillion, a 15 percent increase over the 2015 origination amount. The number of all mortgages originated last year increased 10 percent from 2015 to just shy of eight million mortgages. Last year’s originations were tilted slightly toward refinancing, which jumped year over year by 19 percent in dollars and 13 percent in number and accounted for just over half of mortgages originated in 2016. Last year’s purchase originations increased year over year by 11 percent in dollars and 7 percent in number. The purchase originations increase was due to an increase in home sales, a decrease in the share of homes purchased with all cash, and strong home price appreciation.
The annual Home Mortgage Disclosure Act (HMDA)[2] data is expected in mid-September, at which point details on mortgage lending for 2016 will be made public by federal regulators. CoreLogic public records data on mortgage originations tracks well with HMDA. Figure 1 shows a comparison of CoreLogic and HMDA purchase money, refinance, and total origination dollar volumes from 2006 to 2015, as well as 2016 CoreLogic public record origination volume. During this time, the CoreLogic public record estimate of mortgage originations was 2 percent below the HMDA estimate. HMDA typically under counts total market originations because some lenders are exempt from HMDA reporting, and many analysts estimate that lenders reporting under HMDA represent about 95 percent of the total market. Taking into account under coverage, CoreLogic estimates that total market originations for 2016 were approximately $2.1 trillion.
The CoreLogic public records data also shows that nonconventional loans continued to make up a large share of first-lien originations. Figure 2 shows the FHA and VA share of the number of first-lien mortgages, and shows the increase in these originations after the last housing market crisis. The government share of first-lien mortgages held steady at 25 percent in 2016. The chart shows that while there was a small decrease in the FHA share, there was an offsetting increase in the VA share.
While there was a sizable increase in mortgage originations in 2016, increases in mortgage rates over the past year and the dwindling supply of mortgages with interest rates above the current market rate should cause a decrease in mortgage originations in 2017. The average 30-year mortgage interest rate in 2016 was 3.65 percent, and through mid-August of this year it’s been an average of 4.05 percent. Low mortgage rates last year incented many borrowers to refinance, and as of April 2017, only 10 percent of outstanding mortgage debt would have high enough mortgage rates to make refinancing a money-saving option[3].
[1] The mortgage origination numbers in this post refer to first-lien, single-family originations.
[2] The Home Mortgage Disclosure Act (HMDA) requires many financial institutions to maintain, report and publicly disclose information about mortgages. HMDA was originally enacted by Congress in 1975 and is implemented by Regulation C. The Dodd-Frank Act transferred HMDA rulemaking authority from the Federal Reserve Board to the Consumer Financial Protection Bureau (CFPB) on July 21, 2011.
[3] This calculation includes the share of non-delinquent fixed-rate, 30-year mortgages with current mortgage rates above 5 percent.
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