Mortgage originations in the second quarter of 2016, were at the highest volume in a single quarter since Q2 2013, according to the latest Mortgage Monitor Report from Black Knight Financial Services. First-lien mortgage originations saw a total volume of $518 billion in Q2 2016.
Purchase loan originations saw a 52 percent ($102 billion) seasonal increase from Q1 to $297 billion which was the highest level in terms of both volume and dollar amount since 2007.
Black Knight said that refinance lending was below 2015 levels after it had risen three consecutive quarters despite historically low rates and a large pool of refinance candidates.
Prime borrowers with a 740+ credit score made up the majority of the purchase mortgage lending with two-thirds of Q2 purchase activity, but moderate credit borrowers (700-739) saw the most growth with a 13% year-over-year increase.
Distressed sale activity (REO and short sales) represented 7% of all residential transactions in Q2 2016, which was the lowest level in 9 years, but still remains at double the ‘normal’ market level of just over 3%. REO sales represented about two-thirds of distressed sales with an average 27% discount off the normal sales price for the area.
Ohio leads the U.S. with a 44% average discount, followed by New Hampshire and New York with 41%. Florida was in the mid-range with an average discount of 23%, and the Southwest was the lowest, with Texas at 14%, and Nevada 16%.
Here is the breakdown of the most important Q2 2016 numbers from Black Knight:
Total U.S. loan delinquency rate:
Month-over-month change in delinquency rate:
Total U.S. foreclosure pre-sale inventory rate:
Month-over-month change in foreclosure pre-sale inventory rate:
States with highest percentage of non-current* loans:
MS, LA, NJ, WV, AL
States with lowest percentage of non-current* loans:
SD, MT, MN, CO, ND
States with highest percentage of seriously delinquent** loans:
MS, LA, AL, AR, TN
*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.
**Seriously delinquent loans are those past-due 90 days or more.
Totals are extrapolated based on Black Knight Financial Services’ loan-level database of mortgage assets.
Black Knight’s Executive Vice President Ben Graboske explained, “Mortgage originations posted their strongest quarter in three years in Q2 2016. In total, we saw $518 billion in first-lien mortgage originations in Q2, driven by a combination of continued purchase origination growth and refinance activity spurred by low interest rates. Interestingly however, with interest rates 15 basis points lower than in Q1, and even lower than in early 2015, refinance activity wasn’t nearly as strong as one might have expected.
While purchase originations jumped more than 50 percent from Q1, refinances saw only an eight percent increase over that period, and were actually down from the same time last year, despite the number of potential refinance candidates outpacing 2015 by over one million in every month since March. That said, refinance lending has risen for three consecutive quarters and accounted for $221 billion in originations in Q2.”
“It was a particularly strong month for purchase originations, which made up 57 percent of all first-lien lending in the quarter,” Graboske continued. “At $297 billion, Q2 purchase originations marked the highest level – in terms of both volume and dollar amount – seen since 2007. Although the purchase lending credit box remains tight, there is increasing participation among ‘moderate’ credit borrowers as well.
Two-thirds of Q2 purchase loans went to borrowers with credit scores of 740 or higher – on par with what we saw during the same period last year – but there was a 13 percent year-over-year increase in lending to borrowers with credit scores between 700 and 739.
This segment has seen the highest rate of growth over the last three quarters, and now makes up 19 percent of all purchase originations. On the other end of the spectrum, sub-700 score borrowers now account for only 15 percent of originations, with less than five percent going to borrowers with scores of 660 or below. Both of these mark the lowest share of low credit purchase lending seen dating back to at least 2000.”