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What’s Driving the Residential Lending Boom?

houses, homes, suburb, housingThe third quarter of this year recorded 3.25 million mortgage originations secured by residential property, according to new research from ATTOM Data Solutions. This represents a 17% increase from the second quarter, a 45% spike from the third quarter of 2019, and the highest original level in 13 years.

Third-quarter home mortgages totaled an estimated $974.1 billion in total dollar volume, the highest level since 2005. The third-quarter volume was up 20% from the second quarter and up 52% from one year ago.

ATTOM attributed this increased activity to purchase mortgages, which grew faster on a quarterly basis than refinance loan activity for the first time in more than a year. Approximately 1.05 million home-purchase mortgages were issued in the third quarter, up 28% from the second quarter and 25% from the third quarter of 2019. The total volume of this activity was $336.3 billion, a 35% increase from the prior quarter and a 36% ascent from one year earlier.

The median down payment on single-family homes and condos purchased with financing in the third quarter was $20,775, up 48.9% from $13,950 in the previous quarter and up 68.6% from $12,325 in the third quarter of 2019. The latest figure was the highest recorded since at least 2000.

On the refinance side of activity, the number of loans only registered a 16% uptick from the second quarter while the amount refinanced was 15% higher, reaching $587.6 billion. ATTOM determined that 34.5% of all third-quarter mortgages were purchase loans, up from 30.6% in the second quarter, while the 60.3% of refinancing loans in the third quarter fell from the second quarter share of 63.1%.

However, home equity lending did not share in the upward movement – the dollar volume dipped 1% in the third quarter to the lowest level since 2014. Mortgages backed by the Federal Housing Administration accounted for 10.3% of all third-quarter originations, up 9.4% from the second quarter but down 13.2% in the third quarter of 2019. Residential loans backed by the U.S. Department of Veterans Affairs accounted for 8.7% of all third-quarter originations, unchanged from the previous quarter but down slightly from 8.8% one year ago.

“The home-loan industry got even busier in the third quarter of 2020, with the housing market still operating as if the recession brought on by the pandemic didn’t exist,” said Todd Teta, Chief Product Officer at ATTOM Data Solutions. “Buyers and owners, lured by low mortgage rates, kept lining up for loans at levels not seen in more than a decade. The one difference in the third quarter was that purchase lending beat out refinance activity for the first time in more than a year.

“However,” Teta added, “we do cautiously note again, as we have with other recent market reports, that the pandemic and other factors could come together and halt the market boom. In the meantime, the third quarter stands out as another banner quarter for lenders.”

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.

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