New Report Showed Largest Quarterly Origination Volume on Record

Black Knight just released its findings from its latest Mortgage Monitor report. The report covered a smattering of housing industry news, including Q2’s record-breaking origination numbers, what rate lock data suggests is in store for Q3, and how servicer retention rates are holding up amid the surge of refi activity.

Beginning with the analysis of Q2 2020, this period experienced the greatest quarterly origination volume to date (reporting nearly $1.1 trillion in first lien mortgages originated). Experts attribute this impressive number to be a direct result of the historically low interest rates in the market today, which are acting as catalysts for a storm of refinancing.

In regard to refinancing, refinance lending rose over 60% from the prior quarter (Q1 2020), bringing it to 200% higher than this same time last year (in dollar value, this makes up almost 70% of all first lien originations).

Specifically, a staggering statistic of 2.3 million refis were reported as originating in Q2 2020. This impressive amount was the highest amount experienced in almost 17 years. Experts attribute this uptick to have been the result of a more than 4x annual increase in rate/term refis. As for cash-out lending, that rose as well, yet at a lesser percentage of 66% (year over year). For cash-out refinances that occurred during the quarter, the average equity withdrawal was $62,000, a statistic that represented the lowest seen in more than three years (since 2016). In stark contrast, total quarterly withdrawal volumes skyrocketed to their highest levels in more than a decade, reaching an aggregate $44.5 billion in equity tapped via cash-outs.

Purchase loans originating this quarter amounted to $351 billion, driven by low rates and improved affordability. Based on rate lock data, expert analysts believe that the spring homebuying season was pushed back to summer. With purchase locks during Q2 fall 10% below their what was expected, they’re since risen (up 36%), flying in the face of the normal housing market trends.

As of now, purchase locks scheduled to close in Q3 are 23% above seasonal expectations, which the two quarters combined are now more than 6% above expected seasonal volumes.

What’s more, the rate lock data appears to predict even greater surge in refinance lending. Specifically, locks on refis expected to close in the third quarter are already up 20% from Q2.

Black Knight Data & Analytics president Ben Graboske offered his expert insights on the current market, as well as what lies in store: "With market conditions as they are and given the recent delay of the 50 basis points fee on GSE refinances until December, we would expect near-record low interest rates to continue to buoy the market. After all, there are still nearly 18 million homeowners with good credit and at least 20% equity who stand to cut at least 0.75% off their current first lien rate by refinancing.”