Refinancing Share Falls to 44% as Volume Drops Sharply

In the third quarter, refinancing fell to an almost four-year low as conventional funders turned in their second-worst quarterly performance in more than two years.

According to survey figures compiled by Mortgage Servicing News, all residential lenders funded $663 billion in product with refis accounting for 44% of production.

Since the first quarter of 2001, refis have accounted for between 53% and 77% of loan production. Refis peaked in the first quarter of 2003 at 77% of originations but have remained strong nonetheless.

The last time refis were lower than the third-quarter figure was back in the fourth quarter of 2000 (26.8% of production).

Even though total originations fell by 45% (compared to the record third quarter of 2003), the subprime niche continued to shine.

Subprime lenders (A- to D in quality) originated a record $160 billion in product, accounting for 24% of all U.S. loans funded. (The previous subprime record was $157 billion, set in the second quarter.)

Ameriquest Mortgage, Orange, Calif., is believed to be the largest subprime funder. In the third quarter, according to MSN, the company funded $16 billion in subprime loans.

One California mortgage executive familiar with Ameriquest (its wholesale unit is called Argent) said there has been talk that the company funded $8 billion in August alone. But the production volumes for Ameriquest/Argent are estimates. The privately held lender no longer discloses fundings.

Countrywide Home Loans, Calabasas, Calif., was the top overall funder in the third quarter, originating $91.8 billion in all types of home loans. (Roughly $12 billion of Countrywide's quarterly volume includes subprime.) Countrywide was also the nation's top wholesale and correspondent funder. The top retail lender was Wells Fargo Home Mortgage, Des Moines, which originated $39.5 billion through the direct-to-consumer channel.

In the third quarter, every lender among the top 10 experienced a double-digit percentage decline except one - Golden West Financial, Oakland, Calif., which specializes in adjustable-rate lending.

Industry executives have told MSN that when it comes to conventional lending there is now intense price competition in the correspondent channel and some lenders are funding loans at a break-even point or at a loss. "There is no margin left in that business," one investment banker said.

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