- Though originations hit a 30-year low in 2023, ICE eMBS data
shows first-time homebuyers (FTHB) made up the highest share of
agency purchase security issuance in at least 10 years
- In 2023’s 80%+ purchase-driven market, FTHBs account for an
exceptionally high share (44%) of overall agency securities
issuance, raising the specter of performance risk for MBS
investors
- The impact is most pronounced among GSE securities, in which
FTHB purchase loans account for 39% of all 2023 issuance, a 12 pp
higher share than any other vintage in the past decade
- ICE data shows FTHBs have higher average front-end
debt-to-income (DTI) ratios, but back-end DTIs similar to repeat
buyers, spending more on housing but less on other forms of
debt
- While demand in the mortgage market continues to track closely
with interest rate movements, recent periods of easing have
highlighted the potential for a rebound in refinance lending if
rates move lower
- With the ICE US Conforming 30-year Fixed Mortgage Rate Lock
Index showing January rates averaging 6.6%, rate/term refis
returned to make up 24% of the month’s refinance activity, a nearly
two year high
- As noted last month, industry rate predictions would have
millions of recent borrowers in the money for a refi by the end of
2024, yet servicers’ retention of such borrowers hit a 17-year low
in Q4 2023
- According to ICE Market Trends data, the number of days from
rate lock to close matched a 4.5 year low in January, shortening
secondary market hedging times
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global
provider of technology and data, released its March 2024 ICE
Mortgage Monitor Report, based on the company’s industry-leading
mortgage, real estate and public records data sets. Drawing from
ICE’s eMBS agency securities database and ICE Market Trends
originations data, the report notes just 4.3 million mortgages were
originated in 2023, the fewest in the 30 years ICE has been
tracking the metric.
Andy Walden, ICE Vice President of Enterprise Research Strategy,
explains that one byproduct of such low volumes is a significantly
altered makeup of recent agency mortgage-backed security (MBS)
issuance.
“Since 1995, only two quarters have seen fewer than 1 million
first lien mortgages originated,” Walden said. “The first was Q1
2023, and Q4 the second. Looking back, last year’s market was
dominated by purchase lending, with loans to buy homes making up
82% of a historically low number of originations. While it remains
a tough market for prospective purchasers, our eMBS agency
securities database revealed that first-time homebuyers actually
made up 55% of all agency purchase mortgages last year. That’s the
highest share in the 10 years we’ve been tracking the metric.”
“In fact, FTHB purchase loans accounted for an exceptionally
high share of all issuance activity last year. They made up 39% of
all GSE securitizations in 2023 – 12 percentage points higher than
any other vintage in the past decade. The market in which these
folks purchased their first home was one of record house prices,
ballooning down payments, rising rates and elevated DTIs. Given
record exposure to first-time homebuyer loans, it’ll be worth
watching the performance of this cohort very closely moving
forward, particularly for those invested in 2023 agency MBS.”
Leveraging ICE Market Trends origination data sheds further
light on FTHB trends. While on average, FTHBs have higher front-end
DTIs than repeat buyers, their back-end DTIs are more comparable.
FTHBs spend a greater share of their income on housing than repeat
buyers but pay less on other forms of debt in comparison. While
credit scores remain elevated among conventional purchase loans
overall, the average FTHB has a 9-point lower credit score than the
average repeat buyer. The delta widens among VA purchase loans,
with the average FTHB credit score (709) in January 23 points below
that of the average repeat buyer (732). Interestingly, FHA loans,
the choice for many lower credit score buyers, have broadly the
same average credit scores among both first time and repeat
buyers.
Demand in the mortgage market continues to closely follow rate
movements and remains largely purchase driven. With interest rates
averaging 6.6% for the month according to the ICE US Conforming
30-year Fixed Mortgage Rate Lock Index, rate/term refinances –
which have been effectively nonexistent for some time – made up 24%
of January refinance activity, the highest such share in nearly two
years.
“We noted last month that if industry rate projections hold
firm, we could see a mini surge of refi activity around the 2023
vintage by the end of 2024,” Walden continued. “Even the relatively
slight rate pullbacks of December and January spurred a growing
number of homeowners to refinance. Demand is clearly there when
rates cross certain thresholds and, if current rate forecasts hold
true, we expect that demand to increase throughout the year.
Unfortunately, when it comes to retaining the business of
refinancing homeowners, the industry has a lot of ground to make
up. Servicers retained just one of every five such borrowers in Q4
2024, a 17-year low.
“Providing an exemplary servicing experience is critical to
reversing this trend, as is effectively identifying and engaging
with customers likely to refinance. And when they have the
opportunity to serve that customer, lenders need to be sure the
front-end of the process is smooth as well. To that point, we did
see the number of days from rate lock to close hit a 4.5 year low
in January. In addition to enhancing the consumer experience, that
also reduces hedging timelines. Those dynamics are tied tightly to
the rate environment and can turn on a dime. Should rates fall, and
the market shifts more heavily to refis, hedging times could
increase as well – raising associated hedge duration risk. Industry
participants would do well to develop a deep understanding the
complexities of this evolving market to capitalize on opportunity
and minimize risk.”
Much more information on these and other topics can be found in
this month’s Mortgage Monitor.
About Mortgage Monitor
ICE manages the nation’s leading repository of loan-level
residential mortgage data and performance information covering the
majority of the overall market, including tens of millions of loans
across the spectrum of credit products and more than 160 million
historical records. The combined insight of the ICE Home Price
Index and Collateral Analytics’ home price and real estate data
provides one of the most complete, accurate and timely measures of
home prices available, covering 95% of U.S. residential properties
down to the ZIP-code level. In addition, the company maintains one
of the most robust public property records databases available,
covering 99.9% of the U.S. population and households from more than
3,100 counties.
ICE’s research experts carefully analyze this data to produce a
summary supplemented by dozens of charts and graphs that reflect
trend and point-in-time observations for the monthly Mortgage
Monitor Report. To review the full report, visit:
https://www.icemortgagetechnology.com/resources/data-reports
About Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500
company that designs, builds, and operates digital networks that
connect people to opportunity. We provide financial technology and
data services across major asset classes helping our customers
access mission-critical workflow tools that increase transparency
and efficiency. ICE’s futures, equity, and options exchanges --
including the New York Stock Exchange -- and clearing houses help
people invest, raise capital and manage risk. We offer some of the
world’s largest markets to trade and clear energy and environmental
products. Our fixed income, data services and execution
capabilities provide information, analytics and platforms that help
our customers streamline processes and capitalize on opportunities.
At ICE Mortgage Technology, we are transforming U.S. housing
finance, from initial consumer engagement through loan production,
closing, registration and the long-term servicing relationship.
Together, ICE transforms, streamlines, and automates industries to
connect our customers to opportunity.
Trademarks of ICE and/or its affiliates include Intercontinental
Exchange, ICE, ICE block design, NYSE and New York Stock Exchange.
Information regarding additional trademarks and intellectual
property rights of Intercontinental Exchange, Inc. and/or its
affiliates is located here. Key Information Documents for certain
products covered by the EU Packaged Retail and Insurance-based
Investment Products Regulation can be accessed on the relevant
exchange website under the heading “Key Information Documents
(KIDS).”
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 -- Statements in this press release regarding
ICE's business that are not historical facts are "forward-looking
statements" that involve risks and uncertainties. For a discussion
of additional risks and uncertainties, which could cause actual
results to differ from those contained in the forward-looking
statements, see ICE's Securities and Exchange Commission (SEC)
filings, including, but not limited to, the risk factors in ICE's
Annual Report on Form 10-K for the year ended December 31, 2023, as
filed with the SEC on February 8, 2024.
Source: Intercontinental Exchange
Category: Mortgage Technology
ICE-CORP
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240304104837/en/
ICE Media Contact Mitch Cohen mitch.cohen@bkfs.com +1
704-890-8158
ICE Investor Contact: Katia Gonzalez
katia.gonzalez@ice.com +1 (678) 981-3882
Intercontinental Exchange (NYSE:ICE)
Historical Stock Chart
From Apr 2024 to May 2024
Intercontinental Exchange (NYSE:ICE)
Historical Stock Chart
From May 2023 to May 2024