The report shows that overall mortgage lending was up 20% quarter-over-quarter but total volumes were down 16% from the second quarter of 2016. The total for purchase and refinance first lien mortgages was $467 billion.
“Drilling down into the make-up of those originations, we see that refinance lending made up just 31% of all Q2 originations – the lowest such share in over 16 years. Refinance volumes were down as well, falling 20% from Q1, but that drop was more than offset by a 57% seasonal rise in purchase lending,” explained Black Knight Data & Analytics Executive Vice President Ben Graboske.
Purchase originations were up 6% from last year and totaled $321 billion in Q2 2017; the highest quarterly volume since 2007. Despite the strong gain for purchase loans originations, they lag the pre-crisis average by around 30%.
Graboske says that the market doesn't appear to be performing at peak capacity partly due to tougher purchase lending credit requirements. Pre-crisis the average percentage of borrowers with credit scores of 720 or above was 47% in Q2 2017 it was 74%.
He added that there are 65% fewer purchase loans being originated to borrowers with credit scores below 720 compared to pre-crisis and that is causing a strong headwind for the purchase market.
Black Knight calculates that is money 645,000 purchase loans were not originated in the second quarter of 2017 due to tighter lending standards.
More market update:
Purchase lending hit its highest level in 10 years in the second quarter of 2017 according to data from Black Knight Financial.