Mortgage activity highest since 2005
Refinancings are up 58.6% from the first quarter, 160.5% from the same quarter a year earlier
Mortgage originations in metro Denver hit their highest levels since the fall of 2005 as consumers rushed to take advantage of historically low interest rates even with a pandemic in full swing, according to a report Thursday from ATTOM Data Solutions.
In metro Denver, there were 54,837 mortgage originations in the second quarter, including purchase mortgages, refinancings and home equity lines of credit. That’s the highest total since the third quarter of 2005, when there were 61,264 originations, numbers from ATTOM Data Solutions show.
Mortgage originations are up 40.3% from the first quarter and 65% from the second quarter of 2019. Most of that gain came from refinancings, which accounted for 36,898 or 67.3% of all mortgages issued in metro Denver.
Mortgage refinancing are up 58.6% from the first quarter and 160.5% from the same quarter a year earlier in metro Denver, surpassing the more than 100% gain measured nationally over the year.
“The second quarter of 2020 really was a tale of two markets for lenders. One saw a continued flood of homeowners refinancing their loans at lower interest rates while the other saw a drop in home-purchase and home-equity borrowing as the economy sagged under virus-related lockdowns,” Todd Teta, chief product officer at ATTOM Data Solutions, said in the report.
Mortgage rates on 30-year loans of 3% or lower drew in borrowers in droves, and some categories, like Veterans Administration loans, proved especially popular.
Looking at a broader nine-month period from October to June, Veterans United Home Loans, the nation’s largest VA lender, measured a 143% spike in originations in
Denver year-over-year, with purchase mortgages up 13.7% and refinance mortgages up 272%. That increase ranked sixth highest in the country.
“VA loans have already had the lowest average interest rate on the market and were already the best mortgage option for veterans. Couple that with where rates are across the board, and it has been a historically opportune time,” said Chris Birk, director of education for the lender, which is based in Columbia, Mo.
Veteran borrowers largely went with a streamlined process that allowed their loans to shift to a lower rate rather than cashing out, which involves a more complex underwriting process, Birk said.
He also notes that millennial borrowers were driving a disproportionate share of the activity, especially on the purchase side. Originations for VA purchase mortgages among Denver area millennials were up 28% in the 9-month period studied, but down 21% among Gen X and flat among older generations, he said.
One area that hasn’t seen activity increase are home equity lines of credits (HELOCs), even though in theory they should also benefit from the same rush to lock in lower-cost money.
“HELOCs are the common products of commercial banks, all of which suffered balance-sheet damage in March, and will take a long time to recover,” said Lou Barnes, a senior mortgage loan officer with Premier Mortgage Group in Boulder. “Credit unions have filled some of that gap, but big household-name banks stepped out of HELOCs altogether or toughened terms to pointlessness.”
It wasn’t because people were defaulting on their existing home equity lines of credit, but more that other borrowers, especial
ly corporations, were drawing on their lines of credit, putting a crimp on available credit.
There were 5.2% fewer home equity lines of credit in the second quarter in metro Denver than in the first and the volume was down by a third compared to a year earlier, according to ATTOM Data Solutions. HELOC activity was at its lowest levels since the fourth quarter of 2014.
Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com or @AldoSvaldi