Mortgage volume hits 14-year low

A dip in refinancing may be to blame, but experts also point to a shortage of homes for sale.

By MSN Real Estate partner Apr 7, 2014 12:16PM

© Photodisc, SuperStockBy Diana Olick, CNBC


Demand is high, prices are higher, but the housing numbers this spring are just not adding up. Mortgage origination volumes hit their lowest recorded level since at least 2000, according to a report released Monday from Black Knight Financial Services.


The biggest volume drop is in refinances, which have fallen steadily since rates rose a full percentage point in June, but that's not the full picture. It is really about who qualifies for a loan and who does not.


Post continues below

"The refinances are burning out a lot faster than anticipated, but the real culprit is purchase," said Paul Miller, an analyst at FBR Capital Markets. "The purchase market has not picked up at all. It's not that the buyers are not there, it's that there is nothing to buy, and everyone is trying to figure out why."

One answer is that there are still millions of borrowers who owe more on their mortgages than their homes are worth or who have so little equity in their homes that they can't afford a move up. The other issue is credit.


"Credit standards have shown little sign of easing — only about 30 percent of 2013 loans went to borrowers with credit scores below 720 — which indicates that significant opportunity to expand mortgage-origination activity is available, if risk appetites allow," noted Herb Blecher of Black Knight.


The appetite for risk, however, isn't moving much. In the past, when refinance volume fell, banks would make up for it by giving loans to borrowers with less-than-perfect credit.

Despite stories of banks such as Wells Fargo moving into "subprime" again by offering loans to borrowers with lower credit scores, that is the exception, not the rule. Most lenders are not moving their standards because they still have no clear guarantees that if loans go bad they won't be on the hook to Fannie Mae and Freddie Mac to pay those loans back — so called "representations and warranties."


"If you have a 650 FICO, and you call a bank, they won't call you back," Miller said. Banks, he says are drawing the line at a 700 FICO score, and about half the potential buying population is below that score. "The banks are saying: 'Until you give me real reps and warrants relief and let me foreclose on a loan, I'm not going to do it.' How do you do that? You don't originate."

That is why so much of the growth in home sales is in the higher end of the market, where buyers have higher scores and higher down payments. Analysts at Raymond James, just back from a tour of the nation's home builders, refer to this recovery as the "Haves" versus "Have-Nots." They said they consistently heard that "stringent lending standards and documentation requirements" were hampering sales, especially on the lower end.


"A disproportionate amount of the strengthening activity we saw was in higher price-point communities in highly desirable locations, with A-quality schools and amenities," wrote Raymond James analysts in a note to investors. "Entry-level communities were increasingly scarce to find as more builders roll out 'move up' product, and those we saw showed only limited signs of traffic or sales."


Sales of homes priced below $100,000 fell 18 percent in February from a year ago, while homes priced between $750,000 and $1 million jumped 13 percent, according to the National Association of Realtors. While improvement in the move-up market is certainly welcome, sales of homes priced over $500,000 made up just more than 10 percent of all home sales. Those priced under $100,000 make up more than 20 percent.

Price jumps on the lower end are not helping matters either. Sales of distressed homes had been fueling the housing market in 2013, but they also pushed prices so high in that segment that they priced both investors and regular buyers out. Foreclosure sales in February hit their lowest level since 2007, according to Black Knight.


All these factors together have created a housing recovery that is proceeding "in fits and starts," according to Doug Duncan, chief economist at Fannie Mae. In a monthly survey of consumers, he finds they are more optimistic about the home selling environment and even about their ability to get a mortgage.


"Still, those who are pessimistic about buying or selling a home today tend to point to economic conditions as the primary issue, and most consumers continue to say the economy is on the wrong track," Duncan said.


More from CNBC



Tags: loans
Apr 9, 2014 7:47AM
Bought last year and got a decent rate that allowed me to get my children in a very nice neighborhood with great schools.  5 years ago, I would have never been able to afford this home.  I bought with a 667 credit score no issues; this article is full of bs.  Of course, you cannot be in debt up to your eyeballs and expect to get an approval.  I paid off every single credit card and car note before buying.  My rate last year (April) was 3.8%.  It didnt make sense to rent or stay where we were considering my old rate was almost 8 percent.  So it was either refi or find a nicer home. 
Apr 7, 2014 11:48PM
The Economy is Booming ?  We need more taxes ?  Period !
Apr 7, 2014 9:00PM
Apr 7, 2014 8:59PM
This is a finance article, not a "real estate" article and I think ppl are confused by what the author meant when she wrote "there is nothing to buy" The way that was worded in the article was a little awkward but I do not think the author was refering to "no HOMES for sale" ...they meant NO MORTGAGE PRODUCTS for sale. In other words, the author is saying, there is DEMAND for mortgages (product) but there are no mortgages available - supply is not meeting demand in terms of mortgage products, not housing. I hope this helps!
Apr 7, 2014 8:52PM
Mortgage standards are ridiculous..banks cannot afford to lend money... I don't care if we had zero percent interest rates, 90% of this country's residents do not qualify... very frustrating...
Apr 7, 2014 8:32PM
4 things that are "up"
4 things that are "down"

Apr 7, 2014 8:04PM
Great news! Ronald Reagen deregulated the economy causing boom and bust cycles since the eighties. Conservative economics must die for the good of all.
Apr 7, 2014 7:41PM

Do we really want a repeat of the mortgage melt-down in 2008....................

The loan standards are where they should be - a FICO score of 700 shows good credit and worthy of getting a mortgage loan. The subprimers need to realize they are not viewed as credit worthy...thus no mortgage loans. A mortgage is a priviledge - not a birth right!!

Our liberal hand-out government paid billions for bad choices of mortgagees who obtained loans....but then did not pay them on time. We the taxpayers then paid billions to the lending banks to write down the loans. The banks made unwise loans and WE the taxpayers paid for the bad risk taking. This was grossly unfair for obama to do this!!

Apr 7, 2014 7:32PM
Has anyone understood that the price of housing is still over priced? Wages have done a negative....College is going up, companies don't offer pensions.....medical insurance (we don't want to talk about that fiasco) It's all on you 100%. Take your choice, send your kids through college, buy a house or can't do it all.. ..Not like the past. 
Apr 7, 2014 6:46PM
I am still sitting still because I really don't trust anyone anymore.  I have no debt except for a lst and 2nd mortgage which I have been trying to refinance.  With a credit score of 830, no debt, 2 secured government incomes, all I get is the run around, plus they ding my excellent credit score to boot.  Not moving yet, will continue to research until they really want me instead of the other way around.  In the past I would be an individual that they would be scrambling for because of my payment ethics; however, they now devise a in come to debt ratio which of course I am way over because I cannot get refinanced.  I will continue on paying my 6% plus 8.19%, because after doing so for over 10 years now, maybe I am better off sitting still.  It may prove to benefit me in the long run especially since my property is not uder water anymore and hasn't been for nearly a year now.  Go figure, cannot trust anyone to guide you in a good direction, just a dog eat dog world anymore, and I am not going to be anyone's dinner anymore
Apr 7, 2014 6:32PM
No homes for sale-that's why the real estate market is in the toilet, what a bunch of hooey. There's an abundance of homes for sale.
ask the bank how many they are holding onto that went into foreclosure-you wont get a straight answer, but they have plenty on the books. Few have the credit and cash to buy.
 Stock market will fall big time sooner rather than later. The Great Repression 2015-2020 

Apr 7, 2014 6:25PM

Lets see,

Maybe we should let people apply with little or no credit for Home Loans. Lets call it the "Subprime " market. To do this we'll have the Justice Department with a little help from a community reform group (Lets call it ACORN) demonstrate on several Bank Presidents lawns to get them to give the loans.Then to sell the "Subprime" loans we'll pressure "Standard and Poor's into rating them A+ so the state pension funds will buy them. Then we can start a company called Countrywide Home loans. We'll give "Sweet heart" loans to key senators so they will lobby congress for us.

Finally we should recruit a guy named Franklin Raines for Freddy and Fanny and pay him a bonus whenever he buys one of these subprime loans. If it all goes bad the Federal Government will back it up with its "Full faith and Credit."

Haven't we been there done that and got the mess we are in to prove it?

Apr 7, 2014 6:14PM
And then there the article listed under  "more from MSN real estate...   Chelsea Clinton buys 10.5 million dollar APARTMENT......hmmm....really????   
Apr 7, 2014 6:03PM
This is what happens when your credit has to be picture perfect. It has gone from anybody can get a loan to perfect or near perfect credit. Economy is recovering??? Try telling that to the home owner whose house is worth 1/2 of what they paid for it. A economy on the come back would have restored some of that lost wealth. It has not and will take 10 years to get back to where it was, if ever.
Apr 7, 2014 5:44PM
People are not as mobile as they were. They are scared of more debt. This is a good thing.. One of the main problems is that the banks have made it so expensive with all their fees that most people can't save enough for the small down payment and the high fees in this economy. This administration thinks 10 buck an hour jobs are wonderful. Try buying a house on that. Please vote in the next election for someone that understands the economy and how it works. Hand outs are killing the middle class that are paying for them, and it is now becoming evident. Pay off your debt, and get ready for the next depression. Its coming.
Apr 7, 2014 5:43PM
Being a Banker what I see most startling is how much student and credit card debt is out there, I am STRUGGLING to get these debt burdened kids qualified.  I'm doing more credit counseling than actual qualifying. There seriously should be a standardized test you need to pass before getting your 1st credit card and buying you 1st car. 25% of your income should not just be going to your car payment. I just want to reach over and slap them into reality.

We need more education for there to be less regulation. 

Apr 7, 2014 5:41PM
When the rules were changed about what was required to get a loan to purchase a house, people who would not be able to make the purchase could now do it.  However, changing the rules did not change the ability of the purchaser to PAY FOR IT.  Instead of requiring the earnings of ONE of the members to be sufficient, the criterion is now based on HOUSEHOLD INCOME meaning that two or more persons would be required to  provide income that normally would be the responsibility of only ONE PERSON.  As long as there were sufficient workers in the household, it worked but when one or more lost their jobs, the ability to pay off the debt disappeared and the market crashed.  There were other factors, like the price of the house, the cost of development, etc. but the main cause was the change in the requirement that there be sufficient income from ONE person to cover the payments.
Apr 7, 2014 5:37PM

Some comments below make sense, but others...not so much.  The problem isn't greed, since greed would cause MORE loans to be made, not fewer.  There is nothing wrong with the housing market, the mortgage market, the labor market, or any other market, that hasn't been created by governmental meddling.  The bubble was government incentivized.  Refinancing has been government incentivized.  Building has been government incentivized.  It is NOT working.  Let the market excesses clear themselves out, and quit trying to cause people to behave how you want them to, and we will get back on track in short order.


But, keep playing this fascistic game and any expectation of a thriving economy is fatuous.

Apr 7, 2014 5:24PM
I am a mortgage lender and this article is not accurate.  There are still many loan options out there with credit scores at 640.  First time home buyer loans with grants are available and you can still get a gift from a family member.  :)  Of course as a lender it is best to analyze the complete picture and not put everyone in the same box. 
Apr 7, 2014 5:19PM
My husband and I were going to sell our 170,000 dollar house and get a nicer 280,000 house. Once we decided to sell and get the other house, the interest rates went up and those little points make a big difference on a payment. Now, we're just remodeling the house we're in. The economy isn't that bad. People are just looking around, seeing the price of things and then thinking "You know, this isn't THAT bad. We're comfortable. We'll just stay here"
And that's where we are. 
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Powered by



Find local plumbers, electricians, contractors and more.