Wednesday, January 25, 2012

Mortgage loan payoffs fall in 2011, hit ten-year low

The number of mortgage loans paid off in Colorado was down 6.4 percent during 2011 compared to 2010, although loan payoffs rose from the third quarter to the fourth quarter of 2011. According to a new report released today by the Colorado Division of Housing, public trustees in Colorado released a total of 235,749 deeds of trust during 2011, falling from 2010’s total of 251,861. Typically, a release of a deed of trust occurs when a real estate loan is paid off whether through refinance, sale of property or because the owner has made the final payment on the loan. Release activity declines as refinance and home-sale activity falls.

For the fourth quarter alone, the number of deeds of trust released this year fell 27.3 percent. Releases fell from 80,265 during 2010’s fourth quarter to 58,340 during the same period this year. On the other hand, releases rose from the third quarter of 2011 to the fourth quarter, rising 15.5 percent from the third quarter’s total of 50,506.

“Real estate activity perked up a bit during the fourth quarter, which would reflect some very recent growth in employment and some mild increases in home prices.” said Ryan McMaken, spokesman for the Colorado Division of Housing. “But overall, the fourth quarter’s activity wasn’t enough to keep 2011 from being another flat year,”

According to the report, the number of deeds of trust released during 2011 was the smallest annual release total reported since the state began keeping release records in 2000. Release activity peaked during 2003 when there were 733,373 releases reported in the counties surveyed. The unusually large number of loan payoffs from 2002 through 2005 reflects a period of declining mortgage rates and increasing new home construction that led to a swift rise in home purchase activity and refinancing. From 2003 to 2011, however, loan payoffs fell 67 percent.

In spite of falling mortgage rates since 2008, loan payoff activity has fallen.

“Ten years ago, even a small decline in the mortgage rate would have produced quite a bit of new refinance and sales activity,” McMaken said. “But since 2008, tighter lending standards and a drop in the number of eligible buyers has prevented a sizable surge in new activity in spite of record-low rates.”

Trends in release activity varied by county. From 2010 to 2011, release totals fell in all counties surveyed except Douglas, Jefferson, Morgan, Park, Summit and Teller counties. All counties surveyed reported increases in activity from the third quarter to the fourth quarter of 2011. In general, the counties with higher real estate prices tended to report either increases in release activity, or smaller rates of decline. For example, from 2010 to 2011, some of the largest declines in release activity were found in Mesa, Pueblo, and Weld counties, which tend to have lower real estate prices than counties that reported increases such as Summit, Teller and Douglas Counties.

Totals for releases of deeds of trust are collected quarterly by the Colorado Division of Housing. This report tracks releases of deeds of trust as reported by public trustees in Colorado. The report includes twenty-one counties which are chosen based on population size and to ensure that as many regions of the state as possible are represented. More than 90 percent of all occupied households in Colorado are within the twenty-one counties chosen.

A deed of trust is similar to a mortgage and is a lien on real property to secure payment of an indebtedness. The deed of trust contains a grant of the property to the public trustee for the benefit of the holder. The deed of trust is released when the debt is paid in full.