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Mortgage Lending Plummets Nationwide in Q1

ATTOM released its Q1 2022 U.S. Residential Property Mortgage Origination Report, with data showing that 2.71 million mortgages secured by residential property were originated in Q1 of 2022 nationwide. That figure was down 18% from Q4 of 2021 –the largest quarterly decrease since 2017– and down 32% from Q1 of 2021, reflecting the biggest annual drop since 2014. The decline marked the fourth straight quarterly decrease, resulting from double-digit downturns in purchase and refinance activity, even as home-equity lending increased.

Overall, lenders issued $892.4 billion worth of mortgages in Q1 of 2022. That was down quarterly by 17%, and annually by 27%. Regarding the number of loans, the quarterly and annual decreases in the dollar volume of loans were the largest in five and eight years.

The biggest contributor to the downturn was a decrease in refinance deals. Just 1.45 million residential loans were rolled over into new mortgages during Q1 of 2022, down 22% from Q4 of 2021 and 46% from a year earlier. Amid rising mortgage interest rates, the number of refinance mortgages decreased for the fourth straight quarter while the annual drop was the largest since 2014. The dollar volume of refinance loans was down 20% from the prior quarter and 42% annually, to $470.7 billion.

Refinancing, while still a majority of residential lending activity, also decreased again as a portion of all loans during Q1 of 2022. They represented 53% of all first-quarter mortgages, down from 56% in Q4 of 2021 and 67% in Q1 of 2021.

"The drop-off in Q1 refinancing activity is no surprise with mortgage rates rising as rapidly as they have," said Rick Sharga, Executive VP of Market Intelligence at ATTOM. "But many forecasts expected purchase loans to remain strong in 2022, and even increase in both the number of loans originated and the dollar volume of those loans. The weakness in purchase loan activity shows just how much of an impact the combination of escalating home prices and rising interest rates have had on borrower activity this year."

Purchase-loan activity shrank in Q1 of 2022 as lenders issued 1.01 million mortgages to buyers. That tally was down 18% quarterly and 12% year-over-year. The dollar value of loans taken out to buy residential properties dipped to $371.3 billion, down 16% from Q4 of last year and 1% from Q1 of 2021. Despite those decreases, purchase loans remained at 37% of all loans in Q1 of 2022 and were still up annually from 29%.

In the one category that bucked the trend, home-equity lending went up 6 percent quarterly and 28 percent annually, to 249,900. So-called HELOC mortgages represented 9 percent of all first-quarter residential loans, up from 7 percent in the fourth quarter of 2021 and 5 percent in the first quarter of last year.

The continued shrinkage in overall residential lending during the first quarter reinforced a stark reversal for the mortgage industry following a near-tripling of activity from early 2019 through early 2021. The first-quarter figures come amid multiple forces that threaten to continue the recent trends, including 30-year mortgage rates that have risen past 5 percent this year, an ongoing tight supply of homes for sale around the country that limits the number of home purchases, rising inflation and other uncertainties surrounding the U.S. economy.

They also add to a list of indicators showing that the nation's decade-long housing market boom may be cooling off, including slower price growth, smaller home-seller profits and declining home affordability. Overall lending activity decreased from Q4 of 2021 to Q1 of 2022 in 213 –or 99%– of the 216 metropolitan statistical areas around the U.S. with a population of more than 200,000 and at least 1,000 total residential mortgages issued in Q1 of 2022.

Total lending activity was down at least 10% in 183 metros, and down by at least 20% in 90 metros.

The largest quarterly decreases were in:

  • Huntsville, Alabama (-62%)
  • Louis, Missouri (-52.2%)
  • Augusta, Georgia (-40.8%)
  • Montgomery, Alabama (-37.4%)
  • Des Moines, Iowa (-35.8%)

Excluding St. Louis, metro areas with a population of least 1 million that had the biggest decreases in total loans from Q4 of 2021 to Q1 of 2022 were in: San Jose, California (-34.1%), Boston, Massachusetts (-31.5), Minneapolis, Minnesota (-30.4%), and Rochester, New York (-29.6%).

Key Findings

  • Lenders issued 1,446,622 residential refinance mortgages in Q1 of 2022, down 21.7% from 1,846,450 in Q4 of 2021, and down 45.8% from 2,670,304 in Q1 of 2021.
  • Totals were down for the fourth straight quarter, which had not happened since late 2013 into early 2014.
  • The $470.7 billion dollar volume of refinance packages in Q1 of 2022 was down 19.9% from $587.5 billion in the prior quarter, and down 42.1% from $813.1 billion in Q1 of 2021.
  • Refinancing activity decreased from Q4 of 2021 to Q1 of 2022 in 210 – or 97%– of the 216 metropolitan statistical areas analyzed.
  • Activity dropped at least 10% in 193 metro areas (89%), and by at least 20% in 109 metros (50%).
  • Lenders originated 1,011,975 purchase mortgages in Q1 of 2022. That was down 18.3% from 1,238,432 in Q4, and down 11.7% from 1,145,767 in Q1 of 2021.
  • The $371.3 billion dollar volume of purchase loans in Q1 of 2022 was down 16.2% from $443 billion in the prior quarter, although off just 0.8% from $374.4 billion a year earlier.
  • Residential purchase-mortgage originations decreased from Q4 of 2021 to Q1 of 2022 in 205 of the 216 metro areas in the report (95%).
  • Loans issued to buyers dropped at least 10% in 169 metro areas (78%), and by at least 20% in 113 metros (52%).

"With affordability apparently slowing down demand from move-up homebuyers, we're likely to see a continuing increase in HELOCs and cash-out refinance loans, as those homeowners tap into the record $27 trillion of equity to make improvements in their current properties," said Sharga.

Mortgages backed by the Federal Housing Administration (FHA) rose as a portion of all lending for the third time in the last four quarters, accounting for 281,306, or 10.4%, of all residential property loans originated in Q1 of 2022. That was up from 9.8% in Q4 of 2021, and from 8.9% in Q1 of 2021.

The national median down payment on homes purchased with financing again decreased slightly during Q1 of 2022 – the second straight quarterly drop-off – while the typical amount borrowed rose for the fourth quarter in a row, to another new high.

The median down payment on single-family homes and condos purchased with financing in Q1 of 2022 was $25,200, down 3.1% from $26,000 in the previous quarter but still up 24.4% from $20,250 in Q1 of 2021. Among homes purchased with financing in Q1 of 2022, the median loan amount was $295,075. That was up 0.7% from the prior quarter, and up 11% from the same period in 2021.

Amid those shifts, the typical down payment was 7.2% of the purchase price, down from 7.4% in Q4 of 2021.

To read the full report, including charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].

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