Mortgage Originations Fell Hefty 26% in 3Q09, New Analysis Finds

New 1-4 family mortgage originations tumbled a sizeable 26 percent between the second and third quarters of this year, according to new numbers compiled by Inside Mortgage Finance. Some $410 billion in new mortgages were made in 3Q09, the lowest quarterly pace seen in 2009. This brought mortgage originations for the first nine months of 2009 to $1.41 trillion or not far behind the $1.50 trillion seen for all of 2008.

Most of the decline in third quarter originations was due to a slide in refinance activity in the Fannie Mae/Freddie Mac sector of the market. But new FHA originations held up remarkably well in the third quarter as volume actually rose 6 percent from the second quarter. FHA originations for the first three quarters of 2009 already have set a new annual record at $283 billion.

Preliminary Numbers Show Originations Fell 9% in Third Quarter

A noticeable drop in refinance activity–particularly in the Fannie Mae/Freddie Mac sector–during the third quarter appears to have taken its toll on overall mortgage originations for the period. According to preliminary numbers analyzed by Inside Mortgage Finance, 3Q09 mortgage production slipped about 9 percent from the previous quarter to reach approximately $500 billion in volume. That would bring mortgage originations for the first nine months of the year to some $1.50 trillion.

Significantly, the biggest drop in third quarter originations took place in September when refinance activity declined the most. Nevertheless, the recent drop in 30-year mortgage rates to below 5 percent is likely to boost refinance business in the fourth quarter and limit any major decline in 4Q09 originations.

Refis Accounted for 76% of Mortgages Made in First Half 2009

The refinance share of new mortgages soared to 76 percent in the first six months of 2009, according to Inside Mortgage Finance. This was even higher than the 72 percent refi market share posted during the refi boom of 2003. While the top mortgage originators in the country all benefited from this year’s refi boom, there was a surprising amount of difference among lenders.

Among the top 10 overall mortgage producers, Provident Funding in California had the highest refi share in the first half with 89 percent. US Bank Home Mortgage in Minnesota had the lowest refi share at 68 percent, followed closely by Bank of America with a 70 percent refi level.

NJ, MD and IL Among Top FHA States in Refi Activity in 2009

Even though FHA refinance activity has been relatively subdued this year compared to the overall mortgage market, several top FHA lending states have posted some surprisingly high refi numbers. According to a new analysis by Inside Mortgage Finance, New Jersey–the third largest FHA lending state in the first half of 2009–saw 73 percent of its total FHA volume come from refinances. This is considerably higher than the 57 percent refi share for FHA lending nationwide during the six-month period. Fourth ranked Maryland and fifth ranked Illinois also posted high refi shares of 69 and 73 percent, respectively. California, the top FHA lending state, had one of the lowest refinance shares of all states at just 29 percent.

Mortgage Production Surged an Estimated 40% in 2Q09

Propelled by strong refinancing activity, residential mortgage production surged an estimated 40 percent between the first and second quarters of 2009 to reach some $625 billion in volume, according to preliminary numbers compiled by Inside Mortgage Finance. The second quarter’s originations appear to be the highest quarterly level seen since early 2007.

While all segments of the mortgage market seem to have benefited from historically low mortgage rates in the second quarter, the Fannie Mae/Freddie Mac sector appears to have posted the biggest gains. The estimated $625 billion in 2Q09 volume raised first half mortgage originations to about $1.07 trillion –a healthy 14 percent increase from the same six-month period a year ago.

Refis Accounted for Record 78% of Mortgages Made in 1Q09

The rebound in mortgage lending activity seen in the first quarter of this year was driven mostly by a huge increase in refinance volume, according to numbers compiled by Inside Mortgage Finance. A record high 78 percent of all mortgages made in 1Q09 were refinances, up from 61 percent a year earlier and up from the 72 percent seen during the 2003 refi boom.

A new Inside Mortgage Finance ranking of the top refi lenders in early 2009 reveals that some lenders benefited more than others by the flood in refinance activity. Among the top 10 refi lenders, Provident Funding, MetLife Home Loans and US Bank Home Mortgage posted the highest share of total business attributed to refinance activity. Meanwhile, Bank of America and Citi had the lowest shares of originations linked to refinancings.