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Origination activity down in December

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Financial Stability
Friday, January 14, 2022
According to Black Knight, Inc.’s December 2021 Originations Market Monitor Report, origination activity was down for the fourth consecutive month.

Rate locks were down 35 percent year-over-year in December because of higher interest rates and a seasonal slowdown in home purchases. Purchase loan lock volume fell by 22.5 percent, and rate/term refinances fell another 17.1 percent, both finishing out 2021 at their lowest point in two years.

“With the Federal Reserve speeding the tapering of its bond buying and indicating multiple rate hikes in 2022 to curb inflation, 30-year conforming rates sat above 3.3 percent for much of December,” Black Knight Secondary Marketing Technologies President Scott Happ said in a release.

“Indeed, our OBMMI daily interest rate tracker showed average rates at year’s end within just two basis points of the 2021 high of 3.37 percent.”

Month-over-month, overall rate locks were down 18.3 percent, attributed to a 22.5 percent drop in purchase loan locks. The drop in purchase lock volume resulted in an increase in the refinance share of the market to 48 percent. However, the average refinance credit score was 20 points lower than this time last year. Black Knight said this is not unusual, as higher-credit borrowers tend to sit out rising rate environments.

“Seen in the light of the normal seasonal slowdown in home sales as well as our current rate environment, December’s more than 20 percent drop in purchase loan locks isn’t all that surprising,” Happ said. “Neither was the continued decline in rate/term refinance lending, though the size of the annual decline is noteworthy, if not sobering.

“While cash-out refi locks were also down for the month, they’re still up nearly 18 percent from the same month last year as the product remains somewhat insulated by borrowers taking advantage of soaring home equity levels.”

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