Even While Refinance And ARMs Decreased – Jumbo Loan Demand Rise

According to the findings of a market report by fintech company, Maxex, since the start of 2021, refinance mortgages have declined steadily and the share of adjustable-rate mortgages has dropped for the first time in five months.

The Atlanta-based firm has compiled a long report from its exchange network of more than 225 bank and non-bank originators and 20 major investors.

In March the refinancing loans collapsed by 13% to 38% in comparison to February, and 28% up against September 2020, when they accounted for 66%.

According to the report, the share of adjustable-rate mortgages (ARMs) fell steadily in July, with its volume moving from 14% to 8.1% month-to-month. Even with that significant drop, it was still close to 6% higher than the same time last year.

The report also noted a record-high in the house price appreciation of 16.6%, and continued demand for jumbo RMBS deals, even as the jobs’ data and worry of the spread of the COVID-19 Delta variant could drag the U.S. economy.

Maxex’s chief commercial officer and one of the authors, Greg Richardson, said that surprisingly there had been an increase in the average loan size.

There have been reports of seven jumbo RMBS deals in July, with a volume of more than $3.5 billion.

Richardson said that the Consumer Financial Protection Bureau’s removal of the Appendix Q standard has been attributed, in part, because jumbo mortgages are very paper-intensive and the previous QM definition with Appendix Q was very inefficient because of limited liquidity.

He added, with the new QM originators are allowed to leverage what they have in their origination system and to originate jumbo mortgages more efficiently.

Regarding ARM’s sharp drop, he said, when the rates started backing up, there were more borrowers opting for ARM products, but it got affected when the fixed rates started to come down again.