• The primary reason for the drop is due to low occurrences of refinance originations, according to the report.
  • HELOC originations are strong in the South and West Coast regions of the U.S.
  • Midwest and East Coast purchase loans boosted more than 10 percent since 2015.
  • For the fifth consecutive quarter, FHA loan share rose.

RealtyTrac recently released its U.S. Residential Property Loan Origination Report, revealing 1.4 million residential loans originated in the first quarter of 2016 — down 12 percent from the prior quarter and 8 percent from one year ago.

These figures are the lowest they’ve been since the first quarter of 2014. However, the primary reason for the drop is due to low occurrences of refinance originations, according to the report.

“After a surprisingly strong 2015, the mortgage refi market started running out of steam in the first quarter of 2016 despite lower mortgage interest rates,” said Daren Blomquist, senior vice president of RealtyTrac.

loan_origination_trends_q1_2016

The biggest year-over-year refi drops were seen in Cincinnati, Philladelphia, Milwaukee, Raleigh and Salt Lake City, which all posted percentages ranging from negative 35 to 29 percent.

Chicago refi rates dipped 26 percent in the first quarter.

Purchase originations increased 3 percent year-over-year nationally, with Home Equity Line of Credit (HELOC) loans rising 10 percent on an annual scale.

“Meanwhile, the purchase loan market continued the pattern of slow-and-steady growth that it has been following the past two years, and HELOC originations increased on a year-over-year basis for the 16th consecutive quarter, showing that borrowers are regaining both home value and the confidence needed to increasingly leverage their home equity,” Blomquist said.

HELOC strong in the south, west

The largest year-over-year increases for HELOC originations were in Dallas with an increase of 35 percent, Louisville (up 28 percent), Seattle (up 25 percent), Sacramento (up 25 percent) and Columbus (up 23 percent).

San Antonio also had a 23 percent increase since last year, followed by Orlando, Portland, Cincinnati, and Tampa — all with over 20 percent increases. Mike Pappas, CEO and president of The Keyes Company in South Florida says loosening credit and low interest rates are attracting millennial buyers to the South Florida real estate market, contributing to the 8 percent increase in purchase loan originations for Q1 as compared to last year.

“Our rising prices and increasing equity are giving confidence to homeowners, as we have seen HELOCs increase 12 percent year-over-year,” he said.

HELOC: the whole picture

Bank of America led the pack with HELOC originations in Q1, with 24,033 loans — a 12 percent increase since last year and a 287 percent five-year jump.

Citizens Bank was number five on the list but had an incredible 340 percent increase from last year with 8,069 HELOC originations. Citizens Bank has increased HELOC originations 201 percent over the past five years.

Midwest, east purchase loans boost more than 10 percent

Baltimore had the highest increase in purchase originations, up 26 percent from last year. Tucson (up 18 percent), Louisville (up 17 percent), Minneapolis-St. Paul (up 14 percent) and Nashville (up 14 percent) rounded out the top five metros in biggest year-over-year increases in purchase loans. 

D.C. was a leader with a 13 percent increase in loan originations. Cleveland (up 13 percent), Atlanta (up 12 percent), Indianapolis (up 12 percent), Kansas City (up 11 percent) and St. Louis (up 11 percent) also posted strong annual increases.

Chicago had an 11 percent increase in purchase loan originations, following geographically close cities with similar increases.

FHA loan share climbs annually

For the fifth consecutive quarter, FHA loan share rose. FHA loan share increased 7 percent year-over-year. VA loan share increased 5 percent. Meanwhile, construction loans jumped 19 percent.

Out of all purchase and refinance loans, 17.5 percent were FHA, 8.3 percent were VA, 0.8 percent were construction and 73.4 percent were other loans, which includes conventional.

Loan originations down, but money is up

Despite total loan originations dipping since last year, the estimated total dollar volume of originations increased due to larger than average loans. Loan origination dollar volume reached $444 billion in Q1, which was a 5 percent rise both quarter-over-quarter and year-over-year. This was the fifth consecutive quarter of a yearly rise in loan origination dollar volume.

Purchase loans dropped 11 percent from the previous quarter but increased 8 percent from last year to reach $146 billion. Refinance loans hit $204 billion, an 8 percent increase from last quarter but a 9 percent drop from last year. HELOCs were at $95 billion in Q1, a 34 percent increase from last quarter and a 45 percent increase from last year.

Email Jennifer Riner

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