Tri-Cities homeowners scrambling for refinancing loans dominated the local market during the second quarter. It was the third-straight quarter (nine months) local refi loan originations outnumbered purchases loans. Home Equity Loans (HELOC) originations dropped to a four-quarter low.

Homeowners rolling old mortgages into new ones accounted for 48.6% of all second-quarter lending activity, according to ATTOM Data Solutions’ Property Mortgage Origination report.

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Nationwide refinancing mortgages secured by residential properties were up almost 50% from the prior quarter and more than 100 percent from the same period in 2019, to the highest level in seven years.

The four-county Kingsport-Bristol Metropolitan Statistical Area (MSA) had 949 refi originations during Q2, up 59.2% from Q1, and 78.7% higher than Q2 last year. It was the highest total in nine years.

There were 767 refis in the three-county Johnson City MSA – up 50.7% from Q1 and a 106.7% increase from Q2 last year. It was also a nine-year high for the Johnson City MSA.

“The second quarter of 2020 was a tale of two markets for lenders. One saw a continued flood of homeowners refinancing their loans at lower interest rates while the other saw a drop in home-purchase and home-equity borrowing as the economy sagged under virus-related lockdowns,” said Todd Teta, chief product officer at ATTOM Data Solutions. “How this plays out in the third quarter will depend on how many homeowners still want to roll over their loans and whether the economy recovers enough to boost home sales. The lending market remains buoyed by cheap money but clouded by major uncertainty.”

Local mortgage firms have varied approaches to the surging refi movement. Some – like Benchmark – strive to keep the refi-to-purchase ratio in the 65-35 range to balance their service pace. Others are working refis as hard as they can, according to David Hamilton, president of the Tri-Cities Mortgage Bankers Association. He also pointed out that the Tri-Cities is fertile ground for web-based mortgage firms, and they claim a healthy share of the market.

The surge in refi applications volume has promoted local mortgage companies to urge Realtors and their clients to write 45-day contracts instead of 30-day contracts to ease the workload and smooth out the process of moving approved contracts to close.

“It’s difficult to close on a 30-day contract in this market with the surge in the market,” according to Steve Reed at Benchmark. Home inspectors, appraisals, and title work are all taking longer, he added. “These guys are swamped.” Northeast Tennessee Association of Realtors (NETAR) President Kristi Baily and former NETAR President Karen Randolph affirmed that many – if not most contracts in the current market are of the 45-day variety.

According to the Housing Wire risk explanation in the refi v. purchase situation is a nonstarter based on numbers from the July Ellie Mar Origination Insights Report:

• The percentage of FHA/VA refis declined significantly over the last year. FHA refis averaged 24% of the origination mix in March through December of 2019, but only accounted from 14% of refis now. Similarly, VA averaged 31% of the refi mix in 2019 but now sits at 21%. VA is the primary local federal originator.
• FICO scores are higher for refi borrowers that they are for purchase. Over 90% of refi borrowers had a score of 700 or higher, with 27.9% having an 800 or higher score. For purchase, only 76.4% of borrowers had a score of 700 or higher, and only 16.5% were 800 or better.

ATTOM analyzed recorded mortgage and deed of trust data for single-family homes, condos, townhomes and multi-family properties of two-to-four units for its Loan Origination Report. Each recorded mortgage or deed of trust was counted as separate loan origination.

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