Mortgage Lending Slows Amid Retreat In Refi Activity

ATTOM released its second-quarter 2021 U.S. Residential Property Mortgage Origination Report, which shows that 3.78 million mortgages secured by residential property (1 to 4 units) were originated in the second quarter of 2021 in the United States. That figure was up 29 percent from the second quarter of 2020, but down 3 percent from the first quarter of this year.

The quarterly decline marked the first time since early in 2020 that the total number of home mortgages issued in the U.S. decreased and – more notably – the first time that happened from a first-quarter to a second-quarter period since 2011.

With residential mortgage interest rates dropping back below 3 percent for most 30-year fixed-rate purchase and refinance loans, lenders issued $1.18 trillion worth of mortgages in the second quarter of 2021. That also was up annually, by 39 percent, but down quarterly, by 1 percent.

The rare quarterly drop-off came as a decrease in refinance activity canceled out a rise in home-purchase and home-equity lending.

Lenders refinanced 2.23 million home loans in the second quarter of 2021, up 26 percent from a year earlier, but down 15 percent from the first quarter of this year. The last quarterly decrease in refinancing activity came in early 2020, while the last time the number dropped from a first quarter to a second quarter was in 2017. The second-quarter dollar value of refinance loans rose annually, by 26 percent, but went down quarterly, by 15 percent, to $674.7 billion.

Refinance mortgages still accounted for a majority of all home-lending activity during the second quarter. But the portion dipped from 67 percent to 59 percent, the biggest downward change in four years.

The cooling-off on the refinance side of the lending industry offset a spike in the number of purchase loans issued in the second quarter to 1.32 million – a 52 percent annual and 22 percent quarterly rise. The dollar value of loans taken out to buy a property jumped to $465.5 billion, a 77 percent gain over the second quarter of last year and a 31 percent increase from the first quarter of 2021.

Home-equity lines of credit also rose from the first to the second quarter, to about 225,000. That number, while down annually by 18 percent, was up quarterly by 18 percent. The increase marked the first quarterly rise in HELOC activity since the third quarter of 2019.

The second-quarter dip in total lending and the shift in loan patterns reflected a broader housing market that remained super-heated during the second quarter of 2021 as it continued resisting damage to major sectors of the U.S. economy caused by the Coronavirus pandemic that hit early last year. Home purchases have soared over the past year as a glut of buyers entered the market. That surge in buyer interest came amid a combination of rock-bottom mortgage rates and a desire for many households, financially unscathed by the pandemic, to flee virus-prone areas for the perceived safety of a home and the space for evolving work-at-home lifestyles.

At the same time, the drop in refinance loans could be an indication that lenders may have finally satisfied homeowners’ appetites for rolling over old mortgages into newer ones at lower rates.