Originations on track to surpass $4 trillion; forbearances up again

Rate lock data suggests that mortgage origination volume this year is on track to exceed $4 trillion for the first time ever, according to a new report from Black Knight.

Assuming a 45-day lock-to-close period, rate lock data — which has historically been a good indicator of lending activity — suggests that the third quarter could set new highs in terms of purchase, refi and total lending volumes. Ben Graboske, president of Black Knight’s Data & Analytics division, said that estimated origination volumes based on underlying locks signal that both Q3’s total originations and refi originations could grow 25% from the previous quarter, while purchase originations could be up by 35%.

“This would push 2020 purchase lending to the highest level since 2005 and both refinance lending and total originations to their highest levels ever,” Graboske said. Furthermore, data and market conditions also hint at origination volumes staying elevated into November and possibly further.

Consider that, while September’s lock activity was relatively flat compared to August levels, rate locks through the first half of October are up 4% so far from the previous month. Purchase locks month-to-date are up 6%, while refinance locks have so far risen 3%.

Indeed, extrapolating the data, Black Knight found that through November, purchase lending would already be up 11% from the same period in 2019 — and it’s set to rise even further in December.

“Interest rates setting new record lows in mid- and late October will likely continue to fuel lock activity in coming weeks,” Graboske said.

Meanwhile, after falling due to the expiry of the first wave of COVID-related forbearance plans, the number of mortgages in active forbearance grew again by 31,000 over the final week of October, Black Knight reported. The bump was driven by an increase in forbearance starts, with 33,000 new forbearance plans beginning in the last week of the month.

In total, forbearance plan starts were up 15% in October compared to the previous month, with the increase driven by borrowers reactivating their previously expired plans. The number of active forbearances has grown to 3.008 million, climbing above 3 million again for the first time since the earlier in October. Approximately 5.7% of all active mortgages were in forbearance at the end of the month, representing some $619 billion in unpaid principal.


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