There
was the usual disruption to mortgage application activity during the Thanksgiving
holiday week that ended November 27, although the volume, especially of
purchase applications held up relatively well. The Mortgage Bankers Association
(MBA) said its Market Composite Index, a measure of mortgage loan application
volume, eased back by 0.6 percent on a seasonally adjusted basis from one week
earlier and was down 32 percent absent adjustment. During Thanksgiving week in
2019 the adjusted Index fell by more than 9.2 percent.

The
Refinance Index decreased 5 percent
from the previous week but was 102 percent
higher than the same week one year ago. The refinance share of mortgage
activity decreased to 69.5 percent of total applications from 71.1 percent the
previous week.

The
seasonally adjusted Purchase Index increased 9 percent from one week earlier but
was down by 28 percent on an unadjusted basis. Activity was 28 percent higher
than the same week one year ago.

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

 

“After
adjusting for the Thanksgiving holiday, mortgage applications were mixed, with
a jump in purchase applications and a decline in refinances. Purchase activity
continued to show impressive year-over-year gains
, with both the conventional
and government segments of the market posting another week of growth,” said
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
“Purchase loan amounts continue to be significantly higher than their average
over the past decade and hit $375,000 last week, the largest since the
inception of MBA’s survey in 1990. Housing demand remains strong, and despite
extremely tight inventory and rising prices, home sales are running at their
strongest pace in over a decade.” 

Added
Kan, “The sustained period of low mortgage rates continues to spark borrower
demand, and the mortgage industry is poised for its strongest year in
originations since 2003. The ongoing refinance wave has been beneficial to
homeowners looking to lower their monthly payments during these challenging
economic times brought forth by the pandemic.” 

The FHA share of total applications
decreased to 9.1 percent from 10.0 percent the previous week and the  VA share ticked up to 11.9 percent from 11.8
percent. The USDA share of total applications remained at 0.4 percent. The
average origination balance of applications was $323,200 compared to $318,300
the prior week and the new record high purchase balance cited by Kan was an
increase from $374,100 the previous week.

Both contract and effective interest rates were mixed,
but the changes were minimal. The average contract interest rate for 30-year
fixed-rate mortgages (FRM) with loan balances at or below the $510,400
conforming limit was unchanged at 2.92 percent. Points decreased to 0.31 from
0.35 and the effective rate declined.

The
average contract interest rate for jumbo 30-year FRM, loans with balances that
exceed the conforming limit, increased to 3.19 percent from 3.18 percent, with points increasing to 0.30 from
0.27. The effective rate also moved higher.

The
average contract interest rate for 30-year FRM backed by the FHA moved up by 1
basis point to 3.00 percent. Points rose to 0.34 from 0.27 and the effective
rate increased.

Fifteen-year
FRM had an average rate of 2.53 with 0.27 point. The prior week’s rate was 2.51
percent with 0.34 point. The effective rate was unchanged.

The
average contract interest rate for 5/1 adjustable rate mortgages (ARMs) was unchanged
at 2.63 percent, with points
increasing to 0.47 from 0.44. The effective rate increased from last week.  The ARM share of activity decreased from 1.9
to 1.8 percent of total applications.

MBA’s Weekly
Mortgage Applications Survey has been conducted since 1990 and covers over 75
percent of all U.S. retail residential applications Respondents include
mortgage bankers, commercial banks, and thrifts. Base period and value for all
indexes is March 16, 1990=100 and interest rate information is based on loans
with an 80 percent loan-to-value ratio and points that include the origination
fee.

The share of loans in
forbearance increased
during the week ended November 22 from 5.48 percent of
servicer portfolios to 5.54 percent according to MBA’s latest
Forbearance and Call
Volume Survey. MBA
estimates that 2.8 million homeowners are in forbearance
plans. By stage, 20.34 percent of forborne loans are in the initial plan stage,
while 77.42 percent have received extensions. The remaining 2.24 percent are
forbearance re-entries.  

The share of Fannie Mae and Freddie Mac loans in
forbearance ticked up 1 basis point to 3.36 percent of those portfolios, the
first increase in 25 weeks. Ginnie Mae (VA and FHA) loans increased 10 basis
points to 7.83 percent, and the forbearance share for portfolio loans and
private-label securities (PLS) increased by 15 basis points to 8.63 percent.
The percentage of loans in forbearance for independent mortgage bank (IMB)
servicers increased 9 basis points from the previous week to 6.03 percent, and
the percentage of loans in forbearance for depository servicers increased 3
basis points to 5.47 percent.

“For the second week in a
row, the share of loans in forbearance has increased, driven by a rise in new
forbearance requests and another slowdown in the pace of forbearance exits. The
increase was across all loan and servicer types. Even GSE loans, which had
previously declined for 24 straight weeks, saw an increase last week,” said Mike Fratantoni, MBA’s Senior Vice
President and Chief Economist. “Additionally concerning,
there was an increase in forbearance re-entries, as borrowers who had
previously exited sought relief again. The increase in new forbearance requests
may be the result of additional outreach to homeowners who had previously not
taken advantage of forbearance opportunities.
However, the slowing rate of
exits to a new survey low further highlights that borrowers still in
forbearance are increasingly challenged by the renewed restrictions on economic
activity to contain the surge in COVID-19 cases.”

Added
Fratantoni, “Recent
housing market data remain quite strong and we expect that the market is well
positioned for additional growth next year, but these data show that additional
support is likely needed to get through this winter
.”

Of the cumulative forbearance exits
for the period from June 1 through November 22, 2020, 30.3 percent were borrowers
who had made their monthly payments despite being in forbearance. A loan
deferral or partial claim was given to 24.3 percent while 16.6 percent reinstated
their loans, paying past due amounts when exiting their plans.  Other dispositions:

  • 12.8
    percent were borrowers who did not make all their monthly payments and exited
    forbearance without a loss mitigation plan yet in place.
  • 7.2
    percent were loans paid off through a refinance or home sale.
  • 6.8
    percent received a loan modification.
  • 2.0
    percent resulted in repayment plans, short sales, a deed-in-lieu, or other outcomes.

MBA’s latest Forbearance and Call
Volume Survey covers the period from November 16 through November 22, 2020 and
represents 74 percent of the first-mortgage servicing market (37.1 million
loans).

 

By Jann Swanson , dated 2020-12-02 08:08:54

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Courtesy of Mortgage News Daily

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