Borrowers who took out mortgages in the first half of 2008 showed a strong preference for fixed rate mortgage products due to a decrease in fixed mortgage rates and the continued tightening of lending standards, according to the ""Mortgage Bankers Association's"":http://www.mbaa.org (MBA's) Mortgage Originations Survey released today.
In addition, the government share of originations more than doubled to 11.8 percent in the first half of 2008, compared to 5.7 percent in the second half of 2007. The government loans category includes loans guaranteed or insured by the Department of Veterans Affairs (VA), the Federal Housing Administration (FHA), and Rural Housing Service. The increase in the FHA loan limit, which broadened FHA financing for more borrowers, was one of the factors that contributed to the increased popularity of the FHA loan, MBA explained.
The refinance share of all originations was 61.7 percent in the first half of 2008, compared to 54.8 percent in the second half of 2007. The percent of refinance originations for rate or term purposes increased from 38.1 percent in the second half of 2007 to 48.6 percent in the first half of 2008. The refinance volume also increased 5.8 percent in the first half of 2008, based on data from participants that responded to the 2007 and 2008 bi-annual surveys.
The market for riskier subprime and near-subprime loans shrank considerably following the bursting of the housing bubble. Non-prime loans comprised 3.8 percent of all origination dollars during the first two quarters of this year, compared to 7.5 percent in the second half of 2007. Only 1.7 percent were Alt-A (near-subprime), compared to 7.8 percent in the second half of 2007. By comparison, in the first half of 2008, 82.7 percent of all origination dollars were for prime loans, compared to 79 percent in the second half of 2007, MBA reported.
For first mortgages, fixed-rate loans, excluding interest only loans, accounted for 78.5 percent of dollar volume in the first half of 2008, compared to 63.6 percent in the second half of 2007. Originations of mortgages with deferred amortization (""interest only"" or ""IO"") continued to decrease significantly for both fixed and adjustable rate products from the second half of 2007. Based on MBA's data, IOs accounted for 10.6 percent of originations in the first half of 2008, compared to 22.4 percent in the second half of 2007.
In the first half of 2008, MBA found that first-time home buyer purchases represented 32.2 percent of the number of purchase loans in the first half of 2008, compared to 30.2 percent in the second half of 2007.
Estimates from a separate study, MBA's Mortgage Finance Forecast, demonstrate further trends in origination, as total purchase originations were down by 16.2 percent in the first half of 2008 compared to the second half of 2007. Refinance originations were up 16.3 percent in the first half of 2008 compared to the second half of 2007, this study showed.
MBA's Originations Survey collects information on first- and second-lien mortgages for single-family properties. Information collected in the survey includes detailed origination data on various loan characteristics including loan type, product type, amortization type, first-time home buyers, and property type.