For all the sound and fury surrounding the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule earlier this month, early indications are that TRID isn’t actually going to have any impact on the lifeblood of the mortgage business – originations.
Mortgage applications have been all over the board in the run-up and aftermath of the Oct. 3 implementation of TRID, with applications surging more than 25% in the last week of September in a pre-TRID rush, followed the next week by a 25% drop back down on TRID fears.
But, a new report from FBR & Co., suggests that the application rollercoaster is mere signal noise, and the reality is that fourth quarter mortgage originations are expected to rise over last year.
In FBR’s report, analysts Paul Miller, Thomas LeTrent, and Jessica Levi-Ribner write that initial reports from mortgage lenders are mixed in terms of the impact of TRID, but the analysts expect the impact to be short-lived.
“Thus far, application indices have fallen in 4Q15 following the implementation of TILA-RESPA on October 3, 2015,” FBR’s analysts write. “This has also likely been somewhat attributable to seasonal weakness. Industry estimates call for an approximately 10% to 15% decline in total volumes in 4Q15 relative to 3Q15 totals.”
But a seasonal slowdown of originations is normal for the fourth quarter.
According to FBR’s report, originations fell from $362 billion in the third quarter of 2014 to $355 billion in the fourth quarter. In 2013, the decline was more significant, from $443 billion in the third quarter to $289 billion in the fourth quarter.
FBR’s forecast for the fourth quarter of 2015 has originations coming in at $363 billion, down from an estimated $440 billion in the third quarter, but the fourth quarter of 2015 is still projected to beat the fourth quarter of 2014.
“TILA-RESPA commentary from originators thus far has been mixed, but largely we continue to believe that the impact on industry volumes will be short lived,” FBR’s analysts write. “We are currently forecasting $363 billion of total originations in 4Q15, with purchase originations of $181 billion relatively stable from 4Q14's level of $173 billion.”
As evidence of the post-TRID return back to normal, mortgage applications went back up 11.8% for the week ending Oct. 16, 2015, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.
The most recent mortgage application numbers from the MBA showed that mortgage applications fell 3.5% for the week ending Oct. 23.
More modest increases like those are normal for mortgage application data, with seasonal factors, interest rates, and other influences having an impact on consumers’ desire to buy a house.
But, if early indications are to be believed, it looks like while the implementation process of TRID may have been painful for lenders, consumers haven’t felt the same pain.
And in the long run, it's starting to look like lenders won’t feel any real TRID pain either.