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Refinance Activity Helps Boost Originations 44.6% Year-Over-Year

Outpacing industry forecasts, mortgage originations ticked up 5.2 percent in the second quarter, totaling $405 billion during the three-month period, according to a report released this week from ""Keefe, Bruyette & Woods."":http://www.kbw.com/


On an annual basis, originations are up 44.6 percent, according to the study. Keefe, Bruyette & Woods suggests much of the increase came from refinance activity driven by low interest rates.

Additionally, rising application volume in the second quarter has Keefe, Bruyette & Woods predicting strong origination volume next quarter as well.

The top 25 mortgage originators made up 85 percent of total origination volume over the second quarter, down from 87 percent in the previous quarter.

In total, the top 25 originators wrote $345 billion in loans during the most recent quarter, up 3.3 percent from the previous quarter but outpacing year-ago originations by a significant 44.4 percent.

The top producer of loan originations during the quarter was Wells Fargo with 33.1 percent market share. JPMorgan Chase ranked second, taking 11.1 percent of the market share.

Seven of the top 25 originators experienced declines in origination volume.


Bank of America experienced a quarterly rise in market share â€" rising from 4.2 percent to 4.4 percent â€" but declined significantly from the 14.8 percent share recorded in the second quarter of last year.

Having exited the correspondent market and discontinued selling non-HARP loans to Fannie Mae, BofA's origination volume is down 54 percent year-over-year. However, it increased 18 percent during the second quarter.

While the market is experiencing increased originations, mortgage servicing rights valuations have declined for all the servicers Keefe, Bruyette & Woods tracked for its study. However, the declines average less than 10 basis points per servicer.

Keefe, Bruyette & Woods suggests negative MSRs are reversing, though increased servicing costs may contribute to falling valuations for some.

Repurchase claims remained high for the quarter. However, Keefe, Bruyette & Woods stated, ""recent trends suggest that new rep & warranty claims from the GSEs peaked in 2011.""

For the second quarter, Fannie Mae requested $14.58 billion in repurchases; a total of $2.34 billion in loans were actually repurchased from the GSE during the quarter.

Freddie Mac called for $2.91 billion in repurchases, while $1.18 billion in loans were actually repurchased from Freddie over the quarter.

Edward DeMarco, acting director of the Federal Housing Finance Agency, regulator of the GSEs, stated in a July ""letter"":http://www.fhfa.gov/webfiles/24110/PF_LettertoCong73112.pdf to congress that the GSEs are revising representation and warranty requirements ""to shift the focus of loan quality review to the time of sale to an Enterprise.""

The new rules will also establish that ""a loan that performs successfully for a period of time will not later be subject to repurchase except for very limited reasons,"" according to ""DeMarco's letter."":http://www.fhfa.gov/webfiles/24110/PF_LettertoCong73112.pdf

""We believe that this would be a meaningful positive in terms of improving the access to mortgage credit,"" Keefe, Bruyette & Woods stated of the GSE's rep and warranty revisions.


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