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CUs Benefit as Mortgage Origination Demand Hits Pre-Crisis High
Tuesday, September 13, 2016 6:50 AM

Home purchase lending hit a post-2007 high in the second quarter as low interest rates and growing consumer confidence continue to support the housing market.

Data from the latest CUNA Mutual Group Credit Union Trends Report revealed that credit union first mortgages grew by 1.3 percent during June. While that's down from 2.4 percent reported in June 2015, it represents 8.3 percent year-to-date growth. Adjustable-rate first mortgage balances were also up by a whopping 11.1 percent during the first two quarters of 2016, though that's still a slight drop from the 12.1 percent reported during the first half of 2015.

CUs now hold $341 billion in first mortgages and 3.6 percent of the entire mortgage market, up for 3.2 percent last June, CUNA Mutual said.

Home prices were up by 1.1 percent in June and 5.7 percent year-over-year, and the Core Logic Home Price Index—the source of CUNA Mutual's data—is now 44 percent above its low point from March 2011 and just 6.7 percent behind the peak set in April 2006. Home prices are expected to rise another 5 percent in 2016 and 4 percent in 2017. Therefore, home prices should reach new highs by the end of 2017.

Still, CUNA Mutual reported that existing home sales were up by 1.1 percent for June, compared to 3 percent last June, adding that "the housing market tightened as first time homebuyers entered the market and purchased 33 percent of all sales, the highest share in four years… Credit union mortgage lending should increase as improving financial positions among borrowers and rising incomes justify loosening credit standards. In addition, confidence in the housing market will return as the general economy strengthens and lingering memories regarding the most recent housing downturn fade from view."

Black Knight reported that lenders originated 1.1 million single-family purchase loans in the second quarter, up from 720,000 in the prior quarter. "It was a particularly strong for purchase originations," said Ben Graboske, executive vice president at Black Knight Financial Services in Jacksonville, Fla.

Purchase mortgages totaled $297 billion in the second quarter, up from $195 billion in the first quarter.

"At $297 billion, second quarter purchase originations marked the highest level—in terms of both volume and dollar amount—seen since 2007," Graboske said in a press release.
He predicted that third quarter demand could see another boost due to the June 23 vote by British voters to exit from the European Union, which helped drive interest rates lower.

The Black Knight data is based on purchase loans originated and closed in the second quarter as reported by mortgage servicers.

Loan data from the Federal Housing Administration, Fannie Mae, and Freddie Mac shows the agencies endorsed or purchased just 681,000 single-family loans in the second quarter, up 13.5 percent from a year ago.

Economists at CoreLogic are projecting that loan originations in 2016 will total $1.8 trillion, which would be the highest volume in five years.

It looks like the "pickup in origination volumes are going to be quite strong in the third quarter," said CoreLogic chief economist Frank Nothaft. "We are expecting an increase in purchase money mortgages and also a pickup in refis."

Source:  Credit Union Journal