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MBA Sees Shift Toward FRM Loans

A shift towards fixed-rate loans occurred in both the overall and subprime mortgage origination markets, according to the results of a pair of surveys conducted by the Mortgage Bankers Association of America.

According to the Mid-Year 2007 Mortgage Originations Survey, between the second half of 2006 and the first half of 2007, origination volume increased 3.2% based on dollars but decreased 6.9% based on loan count. The study said the probable cause was an increase in the dollar volume of refinance loans. Refis made up 55% of the first-half 2007 production, compared with 45% for home purchases.

The survey found that for first mortgages, fixed-rate loans - including interest-only loans - accounted for 53.4% in dollar volume or 67.4% by loan count of originations in the first six months of 2007, compared with 46.2% in dollar volume or 60.5% by loan count in the last half of 2006.

First-time homebuyer market share remained unchanged between the second half of 2006 and the first half of 2007, at 26.9%. The average loan amount was $202,265, which was less than the average loan amount of $233,433 for repeat homebuyers.

In a finding that seems surprising given the buzz over the reverse mortgage product, the dollar volume of these loans decreased 92.4% between the last six months of 2006 and the first six months of 2007. FHA's Home Equity Conversion Mortgage volume decreased by 92.4% but other reverse mortgages increased 13%. The number of reverse mortgage loans decreased 93.1%. MBA said the result was driven by a 92.4% decrease in smaller-balance HECM loans. The FHA product is nearly 87% of the dollar volume of all reverse mortgages and thus did not offset the 13% in the balance of other product.

By loan type and dollar volume, in the first half of 2007, 70% was prime loans, up from 62.4% in the second half of 2006. During the same period, nonprime production fell to 10.4% from 17.6%, alt-A production fell to 15.8% from 17.1% and government loan production rose to 3.8% from 3%.

Option ARM originations accounted for 6.3% of dollar volume and 4% of the loan count during the first half of 2007, compared with 13.4% and 7.7%, respectively, in the last half of 2006.

Among the findings of MBA's Mid-Year 2007 Subprime Mortgage Originations Survey is that for the first half of 2007, 64% of subprime originations were for refis, up from 55% in the second half of 2006. Of those refis, 85% took cash out of the property, compared with 87% for the second half of 2006. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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