Mortgages Hit a Record in 2020 – Again

When it comes to mortgages, 2020 is a year that keeps on giving.

The year closed out with a record volume of originations, fueled by historically low interest rates that set off a surge in refinancing.

But, wait, there’s more!

Last week, the Mortgage Bankers Association released its routine monthly update of its economic and mortgage forecasts.

The beauty of the MBA’s reporting is that it not only provides useful views of expectations that are regularly updated to reflect new information, but the forecast numbers are presented along with historical numbers that also get regularly updated as more information arrives.

The most recent forecasts, dated Sept. 21, showed the record originations of $3.8 trillion in 2020 as of its Aug. 18 forecast are now the record originations of $4.1 trillion in 2020. And likewise, the record fourth quarter originations of $1.26 trillion became the record fourth-quarter originations of $1.36 trillion.

What pushed them up? MBA spokesman Adam DeSanctis said detailed HMDA data released earlier this year showed the MBA it needed to raise last year’s refinance originations by 9.6% and its purchase originations by 3.4%.

That’s all well and good for mortgage originators overall, but it’s bad for credit union bragging rights: It means their market share was lower than previously reported.

With the MBA’s new data, credit unions’ share of first-mortgage originations was 7.0% last year, down from 7.5% based on the MBA’s Aug. 18 forecast. Credit union shares fell by 50 or 60 basis points each quarter of 2020. The MBA made no changes this month to first half originations, so credit union shares stand – for now – at 6.7% for the first quarter and 7.7% for the second quarter.

As for the future, the MBA followed the pattern of monthly updates this year, raising refinance estimates significantly as interest rates were lower than expected and dialing back slightly on purchase originations to reflect supply and affordability constraints.

The overall trend is the same: What was up last year is coming down this year – just more slowly than previously expected.

Total originations were still rising slightly in year-ago comparisons in the second quarter, but the MBA showed them dropping 20% this quarter, 50% in the fourth quarter and 36% next year before rising slightly in 2023.

Refinance originations showed big changes. The MBA revised the third quarter upwards by 12% to $498 billion (down 31% from a year earlier) and revised the fourth quarter upwards by a whopping 59% to $273 billion (still down 70% from the all-time record in 2020’s fourth quarter).

The MBA didn’t change its forecast for third-quarter purchase originations. They are expected to be $417 billion, down 3% from 2020’s third quarter. Purchase originations were revised downward 6.2% to $406 billion for the fourth quarter (down 4% from a year earlier) and downward 0.6% to 1.73 trillion for 2022 (up 8% percent from 2021).

Meanwhile, on Monday, MBA Chief Economist Mike Fratantoni announced that the rate of mortgages in forbearance fell below 3% for the first time since March 2020.

Its Sept. 19 survey found 2.96% of mortgages in forbearance, down from 3.0% in its Sept. 12 survey and down from its peak of about 8.2% in May and June 2020. More than seven million homeowners took advantage of COVID-19 hardship forbearances to pause the obligation to make their mortgage payments while they resolved financial insecurity caused by the COVID-19 pandemic and its effects.