The Wall Street Journal

30 Jan 2014

The volume of home mortgages originated during the fourth quarter fell to its lowest level in five years, according to an analysis published Thursday by Inside Mortgage Finance, an industry newsletter.

Lenders have benefited from an unusually long refinance boom over the last five years as the Federal Reserve has embarked on multiple efforts to stimulate the economy by reducing borrowing costs.

Mortgage originations soared in early 2009 after rates on the 30-year fixed-rate mortgage fell below 5%. The Fed’s latest bond-buying campaign unleashed an even more robust refinancing wave in late 2011, when rates fell below 4%. Lenders have also benefited from government programs that made it much easier for some borrowers who owed more than their homes were worth to refinance.

The Inside Mortgage Finance report confirms large drops in mortgage production that many banks have reported over the last two weeks. Volumes tumbled by 19% in the third quarter, fell by another 34% in the fourth quarter, according to the tally.

Mortgage demand weakens in the winter months as home-buying activity slows, but it held up over the past two years because of much stronger refinancing demand.

Overall originations in 2013 stood at nearly $1.9 trillion, down nearly 11% from 2012 but still the second best year for the industry since the mortgage bust deepened in 2008. The Mortgage Bankers Association forecasts originations will fall to $1.1 trillion, the lowest level in 14 years.

The report also showed that the nation’s largest lenders continued to account for a shrinking share of mortgage originations, at around 65.3% of all loans, down from over 90% in 2008.