Refinance Loans Propel Yet Another Increase In Home Mortgage Lending Activity During Fourth Quarter Of 2020

IRVINE, Calif., March 4, 2021 /PRNewswire/ -- ATTOM Data Solutions, curator of the nation's premier property database, today released its fourth-quarter 2020 U.S. Residential Property Mortgage Origination Report, which shows that 3.51 million mortgages secured by residential property (1 to 4 units) were originated in the fourth quarter of 2020 in the United States. That figure was up 5.5 percent from the prior quarter and 48 percent from the fourth quarter of 2019 - to the highest level in almost 14 years.

With interest rates remaining below 3 percent for most purchase and refinance loans, lenders issued $1.06 trillion worth of mortgages in the fourth quarter of 2020 - up 6 percent from the third quarter of 2020 and 55 percent from a year ago, to the largest quarterly amount since at least 2000. The quarterly rate of increase in loans and dollar volume represented the largest gains during any fourth-quarter period since 2011.

The continued boost in mortgage lending activity during the fourth quarter of last year came mostly from another jump in refinance mortgages. But the overall figure also was prompted by relatively strong home-purchase lending and home equity lines of credit.

Lenders refinanced 2.23 million home mortgages in the fourth quarter, which was 12 percent more than in the third quarter of 2020 and 71 percent above the fourth quarter of 2019. The dollar amount of refinance loans rose to $666.8 billion, an 11 percent increase from the prior quarter and a 67 percent increase from a year ago.

Homeowners taking advantage of low rates to roll over old mortgages into new ones continued to account for the majority of home loans in the fourth quarter of 2020. Those loans comprised 63 percent of all home loans, up from 60 percent in the third quarter and 55 percent in the fourth quarter of 2019.

The increase in the number of refinance loans contrasted with declines in home-purchase lending activity, which dropped 4 percent from the third to the fourth quarter of 2020, and with home equity credit lines, which dipped 3 percent. However, both of those declines were milder than usual for the fourth-quarter period of each year - a trend that actually represented additional signs of strength for the lending industry. Purchase lending usually drops more than 10 percent during the fourth quarter of each year while the number of HELOCs decreases more than 5 percent.

The strong home-lending numbers during the fourth quarter came despite the Coronavirus pandemic that continued to spread throughout the country, slowing or stalling major sectors of the economy and keeping unemployment high. A rush of homeowners and home seekers taking out various kinds of loans continued amid a scenario of low-interest rates and a desire of many households unscathed by the pandemic to trade life in congested, virus-prone urban areas for the more spacious confines of a house and yard.

Historical Residential Mortgage Originations Graphic

"Lenders continued working overtime across the United States in the fourth quarter or 2020, with increases in loans and dollar volumes rarely seen during a time of year when activity normally slows down. The rising numbers left another in a long string of markers showing how the housing market has mostly avoided economic damage stemming from the virus pandemic," said Todd Teta, chief product officer at ATTOM Data Solutions. "As with other housing market measures, the appetite for loans among homeowners and home seekers in the coming months remains uncertain, depending on interest rates and multiple factors connected to the pandemic. But the fourth-quarter data shows continued strong demand for new mortgages, especially among homeowners looking to refinance."

Refinance mortgage originations up 12 percent from third quarter
Lenders issued 2,226,951 residential refinance mortgages in the fourth quarter of 2020, up 11.5 percent from the third quarter and 70.7 percent from the fourth quarter of 2019. The dollar volume of refinance packages rose to $666.8 billion in the fourth quarter of 2020, up 11.4 percent from the prior quarter and 66.6 percent from a year earlier.

Refinance activity increased from the third quarter of 2020 to the fourth quarter of 2020 in 189, or 88.3 percent, of the 214 metropolitan statistical areas that had a population greater than 200,000 and at least 1,000 total loans, and rose by at least 15 percent in 100 metro areas (46.7 percent). The largest quarterly increases were in Sioux Falls, SD (up 75.3 percent); Reno, NV (up 55.5 percent); Toledo, OH (up 55.1 percent); Lake Charles, LA (up 47.1 percent) and Chicago, IL (up 44 percent).

Other than Chicago, metro areas with at least 1 million people that had the biggest increases in refinance activity from the third quarter to the fourth quarter of 2020 were Baltimore, MD (up 35.6 percent); San Jose, CA (up 27.5 percent); Tampa, FL (up 25.9 percent) and Indianapolis, IN (up 24.7 percent) and.

Metro areas with the biggest declines in refinancing loans from the third to the fourth quarter of 2020 were led by Ann Arbor, MI (down 63.8 percent); Baton Rouge, LA (down 31 percent); Pittsburgh, PA (down 27.9 percent), Harrisburg, PA (down 20.5 percent) and Trenton, NJ (down 17.4 percent).

Purchase originations dip at unusually slow pace in fourth quarter
Lenders originated 1,037,790 purchase mortgages in the fourth quarter of 2020. While that was down 3.8 percent from the third quarter of last year, the decrease represented the smallest quarterly decline in any fourth-quarter period since at least 2000. Measured year over year, purchase loans were up 37.7 percent from the fourth quarter of 2019.

Residential purchase mortgage originations decreased from the third quarter of 2020 to the fourth quarter of 2020 in 143 of the 214 metro areas in the report (66.8 percent). The largest quarterly decreases were in Ann Arbor, MI (down 66.3 percent); Sioux Falls, SD (down 59.2 percent); Baton Rouge, LA (down 52 percent); Reno, NV (down 50.7 percent) and Pittsburgh, PA (down 37.7 percent).

Counter to the national trend, residential purchase mortgage lending increased or stayed the same from the third quarter to the fourth quarter of 2020 in 71 of the 214 metro areas analyzed in the report (33.2 percent). Increases were in South Bend IN (up 81.2 percent); Chicago, IL (up 36.5 percent); Binghamton, NY (up 35.5 percent); Springfield, IL (up 28.3 percent); and Albany, NY (up 27.7 percent).

HELOC lending down 3 percent from the prior quarter
A total of 245,594 home equity lines of credit (HELOCs) were originated on residential properties in the fourth quarter of 2020, down 3 percent from the previous quarter and down 22.2 percent from a year earlier. The latest count marked the lowest point since the first quarter of 2014. However, the dollar volume of HELOC loans rose 5.3 from the third quarter of 2020 to the fourth quarter of 2020, to $54.76 billion, the largest quarterly increase since the second quarter of 2019.

Counter to the national trend, residential HELOC mortgage originations stayed the same or increased from the third to the fourth quarter of 2020 in 27.3 percent of metro areas analyzed for the report. The biggest increases included Syracuse, NY (up 54.9 percent); Worcester, MA (up 48.6 percent); Providence, RI (up 41.8 percent); Green Bay, WI (up 40.5 percent) and Lansing, MI (up 36.8 percent).

FHA loan share rises
Mortgages backed by the Federal Housing Administration (FHA) accounted for 362,326, or 10.3 percent of all residential property loans originated in the fourth quarter of 2020. That was down from 10.5 percent in the third quarter of 2020 and from 13.1 percent in the fourth quarter of 2019.

Residential loans backed by the U.S. Department of Veterans Affairs (VA) accounted for 290,116, or 8.3 percent, of all residential property loans originated in the fourth quarter of 2020, down from 8.8 percent in the previous quarter and 9.3 percent a year ago.

Median down payments and amounts borrowed again reach new highs
The median down payment on single-family homes and condos purchased with financing in the fourth quarter of 2020 was $24,500, up 19.2 percent from $20,556 in the previous quarter and 82.3 percent from $13,441 in the fourth quarter of 2019. The latest figure marked another new high dating back to  at least 2000.

The median down payment of $24,500 represented 7.7 percent of the median sales price for homes purchased with financing during the fourth quarter of 2020, up from 6.6 percent in the previous quarter and from 5.2 percent a year earlier.

Among homes purchased in the fourth quarter, the median loan amount was $280,000 – also a new high since 2000. That amount was up 3.4 percent from the prior quarter and 24.7 percent from the fourth quarter of 2019.

Report methodology
ATTOM Data Solutions analyzed recorded mortgage and deed of trust data for single-family homes, condos, town homes and multi-family properties of two to four units for this report. Each recorded mortgage or deed of trust was counted as a separate loan origination. Dollar volume was calculated by multiplying the total number of loan originations by the average loan amount for those loan originations.

About ATTOM Data Solutions
ATTOM Data Solutions provides premium property data to power products that improve transparency, innovation, efficiency and disruption in a data-driven economy. ATTOM multi-sources property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, and neighborhood data for more than 155 million U.S. residential and commercial properties covering 99 percent of the nation's population. A rigorous data management process involving more than 20 steps validates, standardizes and enhances the data collected by ATTOM, assigning each property record with a persistent, unique ID — the ATTOM ID. The 20TB ATTOM Data Warehouse fuels innovation in many industries including mortgage, real estate, insurance, marketing, government and more through flexible data delivery solutions that include bulk file licenses, property data APIs, real estate market trends, marketing lists, match & append and introducing the first property data delivery solution, a cloud-based data platform that streamlines data management – Data-as-a-Service (DaaS).

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