Mortgage-origination volume at lowest level since 2014

A harsh revelation for the mortgage industry was among the data points in a quarterly report from the Federal Reserve Bank of New York: Originations dropped to $344 billion during the first three months of this year, the lowest quarterly level since third-quarter 2014.

The report, which came from the New York Fed’s Center for Microeconomic Data and tracked household debt and credit, showed that mortgage borrowing has declined since the most recent peak in 2006. At that time, 34 percent of Americans ages 20 to 69 held a mortgage on their credit reports. By the end of 2018, however, about 26 percent had one, the lowest figure in the study’s 20 years of available data.

If recent quarterly origination numbers are any indication, short-term growth of that share may not be in the cards. Measured by dollar volume, mortgage originations were down from $401 billion in fourth-quarter 2018 — a drop the New York Fed called “a notable decline.” It was the second consecutive quarter that origination volume decreased, as the figure for the past fourth quarter was down from $445 billion in third-quarter 2018.

The New York Fed also reported that mortgage underwriting standards stayed tight on quarter-over-quarter basis. Only 10 percent of first-quarter 2019 mortgages were originated to borrowers with credit scores of less than 647. The median credit score for these borrowers was 759.

There were $9.2 trillion in mortgage balances shown on consumer credit reports in the past first quarter, a gain of $120 billion from fourth-quarter 2018. Balances on home equity lines of credit (HELOCs) saw a modest decrease of $6 billion, continuing a trend that began in 2009. According to the report, HELOC balances now stand at $406 billion.

Mortgage delinquencies did see slight improvements: In the past first quarter, only 1 percent of mortgages had balances that were 90 or more days overdue, down from 1.1 percent in the previous quarter. Transition rates are also seeing positive traction as 0.9 percent of mortgages transitioned into delinquency during first-quarter 2019. Meanwhile, 11.7 percent of mortgages in early-stage delinquency moved into serious-delinquency territory of 90 days or more, the lowest such transition rate since 2005.

Student loan debt, on the other hand, continues to rise, in many cases preventing young buyers from committing to homeownership. Outstanding student-loan debt grew by $29 billion to $1.49 trillion in the past first quarter. Total household debt increased by $124 billion to $13.67 trillion, the 19th consecutive quarter with an increase. Household debt is now $993 billion above the previous peak of $12.68 trillion recorded in third-quarter 2008.

Still, despite the New York Fed’s stark first-quarter report, mortgage-industry insiders remain optimistic about the spring homebuying season, buoyed by strong job-growth and wage-growth numbers, as well as improving near-term loan-application volumes.

“Data from the Mortgage Bankers Association shows that mortgage applications to buy a home — not finance it, just purely to purchase a property — is showing a higher activity this spring compared to last year’s spring,” said Lawrence Yun, chief economist for the National Association of Realtors. “[This] is implying that this job-creating economy is boosting confidence and people want to buy a home.”


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