TRID mortgage application surge amounted to empty calories

Few applications seem to have had follow-through

It looks like the big surge of mortgage applications before the enactment of the TILA-RESPA Integrated Disclosure act was all sound and fury, amounting to nothing.

After a summer of subdued or declining activity, mortgage applications increased 25.5% in the week ending Oct. 2, 2015, the Mortgage Bankers Association said.

“The number of applications for purchase and refinance mortgages soared last week due both to renewed rate volatility and as many applications were filed prior to the TILA-RESPA regulatory change. The average loan size of applications in the weekly survey increased by 6.9%, driven by a 12.1% increase in the average size of refinances,” said Lynn Fisher, MBA’s vice president of research and economics, that week.

The following week, mortgage applications tumbled 27.6%, obliterating the prior week’s drastic jump in applications due to the implementation of the new TILA-RESPA integrated disclosure rule. (Read all about TRID here.)

“Application volume plummeted last week in the wake of the implementation of the new TILA-RESPA integrated disclosures, which caused lenders to significantly revamp their business processes, and as a result dramatically slowed the pace of activity,” said Mike Fratantoni, MBA’s chief economist, at the time.

This led to these back-to-back headlines:

Click to enlarge

(Source: HousingWire)

In essence, loan officers were submitting a mass of applications the week before TRID, many likely multiple applications through various products — the equivalent of throwing everything against the wall to see what would stick, said Kevin Golden, director of analytics for a la mode inc.

“It appears that the applications submitted prior to the TRID implementation deadline were an apparition and haven’t lead to appraisal orders, which are needed to complete the mortgage process,” says Kevin Golden, director of analytics for a la mode inc. “This highlights one of the advantages to using appraisals over applications.”

Appraisal volume is an indicator of market strength and has a few advantages over mortgage applications, especially since fallout is less for appraisals since they are ordered later in the mortgage process after credit worthiness has been approved. 

That prediction bore out, as appraisal activity has been flat or slightly down since the Oct. 3 rush.

Here’s the appraisal volume history in the run up and post-TRID.

Week of Sept. 20       -0.07%  
Week of Sept. 27       -1.02%  
Week of Oct. 4           0.38%  
Week of Oct. 11         -2.86%

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