Fixed Rate Mortgages Dominate Industry Landscape
Borrowers flocked in record numbers to fixed-rate mortgage products during the second half of 2007, as the nation's credit crisis cranked into high gear and concerns over more exotic loan programs grew -- a trend that seems likely to have continued even more strongly into 2008, based on a review of mortgage application data so far this year. According to an originations survey released Tuesday by the Mortgage Bankers Association, for first mortgages, fixed-rate loans accounted for 63.6 percent of loans in the second half of 2007, compared to 53.4 percent in the first half of 2007. Sources told HW that percentage is well over 70 percent so far this year. Beyond a return to more traditional fixed-rate mortgages, 79.0 percent of all origination dollars were for prime loans compared to 70.0 percent in the first half of 2007, the MBA said. The shift in origination mix underscores the clear depths to which subprime mortgage lending has sunk, after accounting for much of the industry's growth between 2003 and 2006. Just 7.5 percent of originations in the back half of 2007 were non-prime, compared to 10.4 percent during the first six months of last year; and 7.8 percent of volume was Alt-A, a steep drop from the 15.8 percent recorded to start 2007. Not surprisingly, the government insured share of originations increased as FHA loans replaced subprime and other nontraditional loans. In the second half of 2007, 5.7 percent of origination dollars were government insured loans, compared with just 3.8 percent in the first half of 2007. Reflecting the growing distress in the mortgage market, firrst-time homebuyer purchases represented 30.2 percent of the number of purchase loans in the second half of 2007, a slight decrease from 32.6 percent in the first half of 2007. For more information, visit http://www.mortgagebankers.org.