As published in Scotsman Guide's Residential Edition, April 2009.
This past December, 67 percent of the brokers responding to our survey expected January to be a better month. That is exactly what happened.
MONTHLY VOLUME DATA ___________________________
To view Wholesale Access' Origination Tracker data in chart form, click here (PowerPoint file).
Average origination volume jumped by 44 percent this past January and is up almost 90 percent from this past November. Again, 67 percent of the respondents reported that they expected February to be better than January. Continued low interest rates on fixed-rate, conforming loans has generated a lot of refinancing opportunities, and we have heard from several large lenders that February may turn out to be their best month ever.
The mortgage-product mix changed from December. Prime loans jumped from accounting for 46 percent of originations to 62 percent, while government loans declined from 42 percent to 32 percent. We continue to hear stories about the difficulty in getting government loans approved. As we mentioned in December's roundup, lenders have raised the minimum FICO scores they will accept and still are experiencing underwriting backups. Again, we do not expect any increase in the percentage of government loans originated in February.
Jumbo loans remained around 5 percent and A-minus at 3 percent. There is also little chance that jumbo loans will increase in the near future.
January also was the first month that we did not pick up any subprime (aka, nonprime) originations.
The percent of ARM loans decreased for seven months leading up to January, in which it comprises less than 1 percent of all loans originated. Compare this to 57 percent of all originations in March 2007 and 18 percent in March 2008. Most loans made during January (62 percent) were to refinance existing mortgage, and many of these loans were aimed at locking in relatively low fixed rates. With low rates, there is little chance that the percent of ARM loans will grow much. ARM loans have gone the same way as subprime, interest-only, payment-option-ARM and even jumbo loans.
January's combined-loan-to-value (CLTV) of loans presents some interesting results, as well. Loans with CLTV of less than 80 percent jumped to comprise almost two-thirds of the market. This is a 49-percent increase from December's results and corresponds to the 34-percent increase in prime loans.
On the other hand, the share of loans with CLTVs of 95 percent and greater showed an equally large decline in the month, from 35 percent of all loans to 20 percent; this likely is attributed to the decline in government loans, which are returning to more reasonable percentage of the market in line with the 30-percent share that some large lenders prefer to hold in their servicing portfolios.
In December and January, the fallout rate declined from 38 percent to 30 percent. If this continues, the hedging costs -- which have been a major concern to the wholesale community -- will begin to decline.
The share of loans for home purchases, versus refinancing existing loans, also declined from 62 percent to 38 percent between December and January. With interest rate on fixed-rate loans remaining low in February, we expect the percent of refinancing will remain high for that month. This does not necessarily mean a slowdown in the total home-purchase volume, considering the origination volume in February also is expected to grow.
This information is compiled monthly by independent research firm Wholesale Access and its partners from a survey of more than 500 mortgage brokers. For more information, visit wholesaleaccess.com.