Mortgage lending crushes records in 2020 at $4.3 trillion

by Candyd Mendoza08 Mar 2021

Mortgage originations for 2020 hit a record-breaking $4.3 trillion, according to Black Knight’s latest Mortgage Monitor Report released today.

For the first time ever, loan originations surpassed $4 trillion, with refinances reaching an all-time high of $2.8 trillion and purchases skyrocketing to $1.5 trillion – the largest annual volume since 2005. In the fourth quarter alone, mortgage lending broke records across the board, with all-time single-quarter highs for purchase lending ($346 billion), refi lending ($869 billion), and total lending ($1.3 trillion).

And, according to Black Knight’s rate lock data, the momentum continued for the first quarter of 2021 despite interest rates rising to a nine-month high. Q1 2021 refinance lending volumes are also expected to hover near the previous quarter’s record-breaking high.

“Roughly 2.8 million homeowners refinanced their mortgages in the last quarter of 2020, which saw a record-breaking $869 billion in refinance lending,” said Ben Graboske, president of Black Knight Data & Analytics. “Assuming a 45-day lock-to-close timeline, daily rate lock data from Black Knight through mid-February suggests refi activity could remain steady in Q1 2021. Of course, that’s before a recent spike in 30-year rates is expected to begin impacting closed loan volumes in late Q1 or early Q2. Still, by the end of March, another 2.8 million homeowners will have taken advantage of near-record-low rates to refinance their mortgages. It’s important to remember that this would be coupled with a 25% reduction from Q4 2020 in purchase loans as well, resulting in an overall 10% quarterly decline.”

With rates on the rise, Graboske said that refi activity has been significantly curtailed. Only 12.96 million high-quality refinance candidates remain in the market, down nearly 30% in just three weeks and the smallest that population has been since May 2020.

“Added to that, retention of what is now a dwindling number of refinancing borrowers remains at record lows, with just 18% being retained by their servicers. Approximately 2.3 million borrowers were not retained in Q4 2020 alone,” Graboske said.

Homeowners who refinanced to improve their rate and/or term were retained at a significantly higher rate (23%) than cash-out refinancers (11%). Meanwhile, those who took out their previous mortgage in 2019 not only drove the biggest volume of Q4 refis (20%), they were also retained at one of the highest paces (24%). Borrowers who took out their prior mortgage earlier in 2020 spurred 8% of all Q4 2020 refinances.