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Early analysis shows little change in number of mortgage originations
Leading up to the October 3rd implementation of the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosures (TRID) rule, there was much buzz and naysaying about how this would affect the mortgage industry, especially originations. A month in, TRID doesn’t seem to have had much impact on originations.
Originations roller coaster
According to Mortgage Bankers Association’s (MBA) data from their Weekly Mortgage Applications Survey, applications increased more than 25 percent in the last week of September in a pre-TRID rush, followed by a nearly 28 percent drop the next week because of TRID jitters. In the week ending October 16, applications rose 11.8 percent, to fall 3.5 percent the next week.
“Application volume plummeted last week in the wake of the implementation of the new TILA-RESPA integrated disclosures, which caused lenders to significantly revamp their business processes, and as a result dramatically slowed the pace of activity,” said Mike Fratantoni, MBA’s chief economist, speaking on the activity of the week ending October 9.
Fratantoni said, “The prior week’s results evidently pulled forward much of the volume that would have more naturally taken place into this week. Purchase volume for the week was below last year’s pace, the first year-over-year decrease since February 2015, while refinance volume dropped sharply even with little change in mortgage rates.”
FBR & Co, suggests in a recent report that the spike and fall in mortgage applications was nothing more than an overreaction, further saying fourth quarter originations are expected to be higher than this time last year. The report’s analysts, Jessica Levi-Ribner, Thomas LeTrent and Paul Miller, stated that initial feedback from mortgage lenders are mixed regarding TRID’s impact. The analysts also posit that if there’s any impact, it would be short-term.
“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.”
History shows that originations normally slow in the fourth quarter. The FBR & Co. report shows that in 2014, originations dropped from $362 billion in the third quarter to $355 billion in the fourth quarter. Going back to 2013, the decline was more significant, from $443 billion in the third quarter to $289 billion in the fourth quarter. FBR & Co. forecasts that fourth quarter mortgage originations will come in at $363 billion, decidedly dropping from third quarter’s estimated $440 million. This is still projected to eclipse fourth quarter of 2014’s numbers.
TRID’s rollout, while a little cumbersome for lenders, consumers seem to have weathered the process and early indications point to lenders coming out relatively unscathed in the long run.