CUs Should Expect Mortgages to Slide Into 2022

The Mortgage Bankers Association’s latest forecast shows the slide in originations continues to be milder than expected, but the trend is clearly downward into 2022.

MBA’s Aug. 18 forecast revised total originations for the third quarter upward by 4.5% to $862 billion. But the revised amount is still down 20% from a year earlier and down 18% from the second quarter.

MBA’s data shows originations peaked at $1.26 trillion in 2020’s fourth quarter, and have fallen each quarter since then. Its forecast shows that trend continuing through the first quarter of 2022 when it expects originations will reach a trough of $516 billion. It shows next year’s peak at $623 billion in the second quarter and falling to $602 billion in the fourth quarter, the end of its current quarterly forecast horizon.

Refinances continue to be the main factor in revisions. MBA again bumped them up, this time by nearly 11% for the third quarter. The expected $445 billion in volume is 32% lower than a year ago and 25% lower than the second quarter.

MBA’s July 21 forecast had expected refis would dip below 50% of the value of originations in the third quarter. Instead, MBA now estimates they are about 52%—down from 56% in the second quarter and 61% a year ago.

MBA has made small changes in purchase forecasts this year, and the Aug. 18 report lowers it 1.4% to $417 billion for the third quarter. The originations are only slightly lower than a year ago and 9% lower than the second quarter.

For the year, MBA’s tweaks increased total originations 1% to $3.61 trillion, which is still 5.7% lower than 2020. Refinance originations are expected to fall 17% to $1.98 trillion in 2021, while purchases are expected to rise 14% to $1.63 trillion.

Joel Kan, MBA’s AVP of economic and industry forecasting, said in a report Wednesday that refinances are down from a year ago even though interest rates in the week ending Aug. 13 were 7 basis points lower than a year earlier.

“The eligible pool of homeowners who stand to benefit from a refinance is smaller now,” Kan said.

FHA loans, which are typically popular with first-time buyers, are expected to fall 21% to $276 billion this year.

Kan said that average loan sizes remain close to record highs.

“This is a continuing sign that sales prices are still elevated, driven by stiff competition leading to accelerating home-price growth,” Kan said.

ATTOM, a property database curator in Irvine, Calif., released a report Thursday showing the median down payment, amount borrowed and ratio of down payment to median home price in the second quarter hit or tied high points not seen since at least 2005.

More than half of down payments on financed residential purchases was $25,000 or more in the second quarter, up 35.1% from a median of $18,500 in the first quarter.

The median down payment of $25,000 represented 7.4% of the median sales in the second quarter, up from 6.1% in the first quarter and 5% a year earlier.

ATTOM’s report also found purchase originations from the first quarter to the second quarter rose in 197 of the 218 metro areas it tracked.

Among the 53 metro areas with more than 1 million people, the biggest gains were Virginia Beach, Va. (up 103.9%); Raleigh, N.C. (up 61.8%); Oklahoma City (up 60.2%); Birmingham, Ala. (up 59.7%) and Richmond, Va. (up 58.4%).

Among the large metros, the biggest declines were in Atlanta (down 43%), St. Louis (down 19.7%); Salt Lake City (down 16.8%); Memphis (down 3.3%) and Pittsburgh (down 3.1%).