Real Estate News & Commentary

Refi Madness: With Historic Low Rates, Homeowners Scramble to Refinance Mortgages

Expertise: Business Management, Personal Finance
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With interest rates hovering at historic lows (around 3% for a 30-year fixed-rate loan), homeowners refinancing old mortgages represented 62% of all lending activity in the second quarter of 2020.

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Nearly 1.7 million residential property mortgages (an estimated $513 billion) were refinanced in April, May, and June, according to Irvine, California-based ATTOM Data Solutions, a leading residential real estate property data company. "Residential properties" were defined as one to four units.

The Q2 economy sagged under virus-related lockdowns and uncertainty. In spite of this, the lending market remains buoyed by cheap money, and many homeowners opted to take advantage of low rates to roll over their loans. Mortgage rollovers shot to the highest level in seven years—up almost 50% from the prior quarter and more than 100% from the same period in 2019.

While refinancing activity soared, purchase mortgage activity dropped to just 28.8% of all home loans in the second quarter of 2020. Home equity lending (HELOCs) declined to 9.2%.

Related: Mortgage Refinances Just Got More Expensive: New Fee Could Cost Homeowners Thousands

“The second quarter of 2020 really was a tale of two markets for lenders,” said Todd Teta, chief product officer at ATTOM Data. “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.”

That happened as the worldwide coronavirus pandemic swept across the United States, stifling consumer spending and prompting untold numbers of potential home seekers to stay out of the housing market.


Refinance Originations Double in Most of the Nation

Lenders originated 1,686,340 refinance mortgages in the second quarter of 2020, up 47% from the first quarter of the year and up 126% from the second quarter of 2019—to the highest level since the second quarter of 2013.

Residential refinance mortgage originations increased from the second quarter of 2019 to the second quarter of 2020 in all but one of the 211 metropolitan statistical areas that had a population greater than 200,000 and at least 1,000 total loans. The number at least doubled in 158, or 74.9%, of those metro areas, led by Madison, Wisconsin (up 403.7%); Hilton Head, South Carolina (up 358.7%); Charleston, South Carolina (up 322.4%); Greenville, South Carolina (up 321.8%) and Lincoln, Nebraska (up 269.2%).

Related: Small Town Markets Have Huge Investment Potential in 2020—Here’s Why (& How to Capitalize on It)

Metro areas with at least 1 million people that saw refinance activity at least doubled, year over year, in the second quarter of 2020 included:

  • Washington, DC (up 219.9%)
  • Milwaukee, WI (up 213.1%)
  • Austin, TX (up 211.9%)
  • Raleigh, NC (up 205.3%)
  • Birmingham, AL (up 198.4%)

Pittsburgh was the only metro area where refinance mortgages decreased in the second quarter, measured year over year (down 5.7%). Those with the smallest annual increases were:

  • Lexington, KY (up 7.5%)
  • Myrtle Beach, SC (up 8.6%)
  • Syracuse, NY (up 22%)
  • Gulfport, MS (up 25.4%)

Purchase Mortgage Originations Down

Lenders originated 782,829 residential purchase mortgages in the second quarter of 2020, up 14% from the previous quarter but down 2% from the same period in 2019.

Residential purchase mortgage originations decreased from a year ago in 132 of the 211 metro areas analyzed for the report (62.6%). The largest declines were in:

  • Myrtle Beach, SC (down 75.1%)
  • Pittsburgh, PA (down 64.6%)
  • Lynchburg, VA (down 41.5%)
  • Jackson, MS (down 41%)
  • Charlottesville, VA (down 40.9%)

Related: The No. 1 Most Overlooked Real Estate Market

Aside from Pittsburgh, metro areas with at least 1 million people and the biggest year-over-year decreases in purchase originations were:

  • Detroit, MI (down 37%)
  • Hartford, CT (down 30.7%)
  • Boston, MA (down 29.8%)
  • Philadelphia, PA (down 27.6%)

Counter to the national trend, residential purchase mortgage lending increased in the second quarter of 2020 from a year ago in 79 of the 211 metro areas analyzed. The greatest increases were in:

  • Davenport, IA (up 150.5%)
  • South Bend, IN (up 135%)
  • Provo, UT (up 74.1%)
  • Santa Rosa, CA (up 73.7%)
  • San Diego, CA (up 70.3%)

Travel concept with red pushpin

HELOC Originations Down

A total of 249,744 home equity lines of credit (HELOCs) were originated on residential properties in the second quarter of 2020, down 9% from the previous quarter and down 25% from a year earlier.

Residential HELOC mortgage originations decreased from a year ago in 90.3% of metropolitan statistical areas that have a population greater than 200,000 and sufficient data to analyze. Some of the largest included:

  • Charleston, SC (down 70.4%)
  • Columbia, SC (down 68.3%)
  • Greenville, SC (down 65.2%)
  • Pittsburgh, PA (down 60.5%)
  • Detroit, MI (down 51.8%)

Counter to the national trend, residential HELOC mortgage originations increased in the second quarter of 2020 from a year ago or stayed the same in 9.7% of metro areas with sufficient data. Some of the increases were in:

  • Davenport, IA (up 43.3%)
  • Youngstown, OH (up 5.5%)
  • Ogden, UT (up 5%)
  • Provo, UT (up 1.9%)
  • Des Moines, IA (up 1.9%)

FHA Loan Share Sinks to 12-year Low

Mortgages backed by the Federal Housing Administration (FHA) accounted for 248,544, or 9.1% of all residential property loans originated in the second quarter of 2020. That was down from 12.6% of all loans in the first quarter of 2020 and 13.4% in the second quarter of 2019—to the lowest level since the first quarter of 2008.

Residential loans backed by the U.S. Department of Veterans Affairs (VA) accounted for 230,808 or 8.5% of all residential property loans originated in the second quarter of 2020, down from 9.9% in the previous quarter but up from 7.5% a year ago.

See ATTOM Data’s “Q2 2020 U.S. Residential Property Mortgage Origination Report” for the complete overview.

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Scott Royal Smith is an asset protection attorney and long-time real estate investor. His law firm, Royal Legal Solutions, helps thousands of real esta...
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    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied 21 days ago
    The real estate market is just wild right now. Hard to make sense out of other than I guess low inventory and money printer go brrr.
    Ron Rohrssen Rental Property Investor from Marion, IA
    Replied 21 days ago
    While advertised rates are low, I'm finding that banks and credit unions are tacking on extra % points for investment properties. That makes the gap between my current rates and available rates to investors pretty trivial. Has anyone found a refinance rate program for investors where you can get into the low 3% range or less?
    Pete Lucibello from Hamden, Connecticut
    Replied 18 days ago
    Doing one now 3.375 investment property.
    Bill Y. Rental Property Investor from West Chester, OH
    Replied 17 days ago
    Peter, can you share what bank? How many points with that? Term?
    Katie Rogers from Santa Barbara, California
    Replied 19 days ago
    If you have enough equity in the property, getting a mortgage pay-off HELOC is a cheap way to get a refinance. Make sure you have the discipline to pay an amount equal to the first month's payment every month in order to increase the portion of principal being paid with each payment.
    Jim Masi Flipper from Hightstown, New Jersey
    Replied 18 days ago
    Mr. Lucibello, care to share your lender?
    Paul Mutch
    Replied 18 days ago
    I have a 2 family that at the time was my primary residence and I refinanced at 3.25. I’ve been out of that house for 4 years but am doing the paperwork now to refi at 2.75. I’m not going back to 30. Continuing my current term. The earlier and new loans are VA loans so it may not help you.