Alt-A Up, Rest Down

In the first half 2006, U.S. residential mortgage volume amounted to $815 billion, the Mortgage Bankers Association announced today.

The figures were based on the Mortgage Originations Survey of 115 respondents — including almost all of the top 30 originators.

First mortgage production dropped 16 percent from the second half 2005 to $640 billion, aided by a 30 percent downturn in subprime first lien volume, according to the survey. Volume reflected a 10 percent decrease in purchase mortgages and a 22 percent decline in refinances.

Loans for first-time borrowers averaged $189,883, compared to $236,517 for veteran borrowers, the survey indicated.

About half of the loans through June 30 were fixed rate, slightly lower than the prior six-month period, MBA added.

Of overall first half loans, 26 percent were IOs — of which 24 percent had a fixed rate compared to only 8 percent in the previous period — and 15 percent were payment-option mortgages, according to the announcement.

“In the context of a decelerating housing market and a slowing of overall mortgage originations activity, consumers continued to choose IOs and payment option loans,” said Doug Duncan, MBA’s chief economist, in the announcement. “In particular, fixed-rate IO volume increased markedly. As expected, consumers respond to changing opportunities in the marketplace, but it looks like these products serve an important need.”

From the last half of 2005 to the latest half, reverse mortgage dollar volume tumbled 23 percent, reflecting a 16 percent drop in federally-insured Home Equity Conversion Mortgages and 76 percent downturn in other reverse mortgages.

Second mortgage production of $175 billion increased 1 percent from the second half 2005, in part due to a 14 percent downturn in subprime second volume.

Data indicated a trend toward fixed rates in second mortgages, as closed-end seconds increased 59 percent while variable-rate home equity lines of credit increased only 3 percent, MBA said.

The share of closed-end seconds, at 34 percent, increased from 22 percent over that time, according to the announcement.

Subprime mortgages represented 19 percent of all first half loans, MBA reported, adding that activity in this segment slowed as well from the second half 2005.

“Consumers respond to changing opportunities in the marketplace, but it looks like these products serve an important need,” Duncan added. “In particular, one in four subprime purchase loans was made to a first-time homebuyer during this time period.”

Of subprime first mortgages, 55 percent were for refinance compared with 60 percent in the second half 2005, the announcement said. Among subprime refinances, cashout loans declined to 75 percent from 88 percent in the same periods.

Subprime home purchase loans declined 25 percent from the second half of 2005, whereas prime loans for home purchases declined only 6 percent during that same period.

ARM loans, including those with an IO feature, comprised 67 percent of subprime loans, versus 74 percent in the second half, MBA added.

The average subprime loan amount was reportedly $200,167, up 7 percent.

Subprime second mortgage originations declined 14 percent from the second half 2005 and had an average loan amount of $33,555, dropping from $52,382 largely due to a sharp increase in low balance stand alone HELOCs, MBA reported.