The second quarter of 2020 saw homeowners refinance loans at the highest levels in the past seven years. The amount refinanced also hit a 17-year high, according to the ATTOM Data Solutions 2020 U.S. Residential Property Mortgage Origination Report.
That report shows 1.69 million refinance mortgages secured by residential properties (1 to 4 units) were originated in the second quarter of 2020 in the U.S. That figure was up almost 50% from the prior quarter and over 100% from the same period in 2019.
With interest rates hovering at historic lows of around 3% for a 30-year fixed-rate loan, refinance mortgages originated in the second quarter of 2020 represented an estimated $513 billion in total dollar volume. That number was up 130% from a year ago, to the highest point in almost 17 years.
Refinance loans helped drive the total number of home loans in the second quarter of 2020 up to 2.72 million, an 11-year high. Homeowners rolling over old mortgages into new ones accounted for 62% of all lending activity in the second quarter of 2020, up from 54.5% of loans in the first quarter of 2020 and from 39.6% in the second quarter of 2019.
While refinancing activity soared, purchase mortgage activity dropped to just 28.8% of all home loans in the second quarter of 2020 and home equity lending, or HELOCs, declined to only 9.2% - the lowest levels in seven years. That happened as the worldwide coronavirus pandemic swept across the United States, stifling consumer spending and prompting untold numbers of potential home seekers abiding by social distancing recommendations to stay out of the housing market.
“The second quarter of 2020 really was a tale of two markets for lenders. One saw a continued flood of homeowners refinancing their loans at lower interest rates while the other saw a drop in home-purchase and home-equity borrowing as the economy sagged under virus-related lockdowns,” said Todd Teta, chief product officer at ATTOM Data Solutions. “How this plays out in the third quarter will depend on how many homeowners still want to roll over their loans and whether the economy recovers enough to boost home sales. The lending market remains buoyed by cheap money but clouded by major uncertainty.”
Refinance Originations Double In Three-Quarters Of The Nation
Lenders originated 1,686,340 refinance mortgages in the second quarter of 2020, up 47% from the first quarter of the year and up 126% from the second quarter of 2019, to the highest level since the second quarter of 2013.
Residential refinance mortgage originations increased from the second quarter of 2019 to the second quarter of 2020 in all but one of the 211 metropolitan statistical areas that had a population greater than 200,000 and at least 1,000 total loans. The number at least doubled in 158, or 74.9%, of those metro areas, led by Madison, Wisconsin (up 403.7%); Hilton Head, South Carolina (up 358.7%); Charleston, South Carolina (up 322.4%); Greenville, South Carolina (up 321.8%) and Lincoln, Nebraska (up 269.2%).
Metro areas with at least 1 million people that saw refinance activity at least doubled, year over year, in the second quarter of 2020 included Washington, D.C. (up 219.9%); Milwaukee, Wisconsin (up 213.1%); Austin, Texas (up 211.9%); Raleigh, North Carolina (up 205.3%) and Birmingham, AL (up 198.4%).
Pittsburgh, Pennsylvania was the only metro area where refinance mortgages decreased in the second quarter, measured year over year (down 5.7%). Those with the smallest annual increases were Lexington, Kentucky (up 7.5%); Myrtle Beach, South Carolina (up 8.6%); Syracuse, New York (up 22%) and Gulfport, Mississippi (up 25.4%).
Purchase Mortgage Originations Down 2% From A Year Ago
Lenders originated 782,829 residential purchase mortgages in the second quarter of 2020, up 14% from the previous quarter, but down 2% from the same period in 2019.
Residential purchase mortgage originations decreased from a year ago in 132 of the 211 metro areas that have a population greater than 200,000 and were analyzed for this report (62.6%). The largest declines were in Myrtle Beach, South Carolina (down 75.1%); Pittsburgh, Pennsylvania (down 64.6%); Lynchburg, Virginia (down 41.5%); Jackson, Mississippi (down 41%) and Charlottesville, Virginia (down 40.9%).
Aside from Pittsburgh, Pennsylvania, metro areas with at least 1 million people and the biggest year-over-year decreases in purchase originations were Detroit, Michigan (down 37%); Hartford, Connecticut (down 30.7%); Boston, Massachusetts (down 29.8%) and Philadelphia, Pennsylvania (down 27.6%).
Counter to the national trend, residential purchase mortgage lending increased in the second quarter of 2020 from a year ago in 79 of the 211 metro areas analyzed in the report (37.4%). Some of the greatest increases were in Davenport, Iowa (up 150.5%); South Bend, Indiana (up 135%); Provo, Utah (up 74.1%); Santa Rosa, California (up 73.7%) and San Diego, California (up 70.3%).
HELOC Originations Down 25% From A Year Ago
A total of 249,744 home equity lines of credit (HELOCs) were originated on residential properties in the second quarter of 2020, down 9% from the previous quarter and down 25% from a year earlier.
Residential HELOC mortgage originations decreased from a year ago in 90.3% of metropolitan statistical areas that have a population greater than 200,000 and sufficient data to analyze. Some of the largest included Charleston, South Carolina (down 70.4%); Columbia, South Carolina (down 68.3%); Greenville, South Carolina (down 65.2%); Pittsburgh, Pennsylvania (down 60.5%) and Detroit, Michigan (down 51.8%).
Counter to the national trend, residential HELOC mortgage originations increased in the second quarter of 2020 from a year ago or stayed the same in 9.7% of metro areas with sufficient data. Some of the increases were in Davenport, Iowa (up 43.3%); Youngstown, Ohio (up 5.5%); Ogden, Utah (up 5%); Provo, Utah (up 1.9%) and Des Moines, Iowa (up 1.9%).
FHA Loan Share Sinks To 12-Year Low
Mortgages backed by the Federal Housing Administration (FHA) accounted for 248,544, or 9.1% of all residential property loans originated in the second quarter of 2020. That was down from 12.6% of all loans in the first quarter of 2020 and 13.4% in the second quarter of 2019, to the lowest level since the first quarter of 2008.
Residential loans backed by the U.S. Department of Veterans Affairs (VA) accounted for 230,808 or 8.5% of all residential property loans originated in the second quarter of 2020, down from 9.9% in the previous quarter, but up from 7.5% a year ago.