Applications for
both refinancing and purchase mortgages retreated last week, pulling the
Mortgage Bankers Associations (MBA’s) Market Composite Index lower for the
second time in as many weeks. MBA said the index, a measure of application
volume, declined by 1.8 percent on a seasonally adjusted basis during the week
ended June 26 and was down 2.0 percent on an unadjusted basis.

While the
Refinance Index ticked down 2 percent from the week ended June 19, low interest
rates kept the refinancing volume 74 percent higher than the same week one year
ago. The refinance share of mortgage activity decreased to 61.2 percent of
total applications from 61.3 percent the previous week.

The seasonally
adjusted Purchase Index dipped 1 percent and the unadjusted version was down 2
percent compared with the previous week. Volume was still 15 percent higher
than the same week one year ago.

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

“Mortgage
applications fell last week despite mortgage rates hitting another record low
in MBA’s survey. Investors are contemplating the risks of the recent resurgence
of COVID-19 cases to the labor market and economy, and Treasury rates and
mortgage rates are moving lower as a result,” said Joel Kan, MBA’s Associative
Vice President of Economic and Industry Forecasting. “After two months of
strong growth, purchase applications declined for the second week in a row. The
weakening in activity is potentially a signal that pent-up demand is starting
to wane and that low housing supply is limiting prospective buyers’ options.
The average purchase application loan size increased to a record high in our
survey – more proof that tight inventory conditions are leading to faster price
growth
.” 

Added Kan,
“Refinance applications also decreased but remained 74 percent higher than a
year ago. The 30-year fixed rate has been below the 3.5 percent mark since late
March. It is possible that many borrowers have already refinanced or are
waiting for rates to go even lower.”

The
FHA share of total applications increased to 11.7 percent from 11.4 percent the
prior week and the VA share dipped to 10.8 percent from 11.0 percent. The USDA
share was 0.6 percent, down 0.1 point. The origination balance of
mortgages  averaged $322,200, compared to
$326,300 the previous week and purchase mortgages averaged $360,300, a slight
increase from $359,200 the week before.

The average
contract interest rate
for 30-year fixed-rate mortgages (FRM) with origination
balances at or below the conforming limit of $510,400 decreased to 3.29 percent
from 3.30 percent, with points increasing to 0.36 from  0.32. The effective rate was unchanged from
last week.

The average rate for jumbo
30-year FRM, loans with balances exceeding the conforming limit, declined 3
basis points to 3.59 percent. Points increased to 0.31 from 0.29 and the
effective rate was down.

The rate for
30-year FRM backed by the FHA increased to 3.43 percent from 3.35 percent, with points increasing to 0.36 from
0.22. The effective rate also increased.

The contract rate for 15-year
FRM was unchanged at 2.81 percent while points increased to 0.40 from 0.30. The
effective rate increased from last week.

The
average contract interest rate for 5/1 adjustable rate mortgages (ARMs)
decreased to 3.04 percent from 3.09 percent and points declined to -0.03 from
0.01. The effective rate was lower than the prior week. The adjustable-rate
mortgage (ARM) share of activity increased to 3.2 percent of total applications
from 3.1 percent a week earlier.

MBA’s Weekly Mortgage Applications
Survey 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.

MBA
also released data from its Forbearance
and Call Volume Survey for the week ended June 21 and noted that the number of
loans in forbearance declined for the second consecutive week.
There was
a total of 4.2 million active plans at the end of the reporting period, down
from 4.3 million a week earlier and the percentage of all loans in COVID-19
forbearance declined from 8.55 percent to 8.48 percent.

After a 19-basis
point drop a week earlier, the percentage of loans serviced for portfolio
lenders and private label security investors that were in forbearance jumped up
8 basis points to 10.07 percent. The Ginnie Mae (FHA and VA  loans) share was at 11.83 percent for the
third week, and the GSE share dropped for the third straight week to 6.26
percent, a 5-basis point decline. The percentage of depository servicer loans
in forbearance had its second straight decline landing at 9.09 percent, while
the percentage of loans in forbearance for independent mortgage bank (IMB)
servicers increased to 8.42 percent.

“The overall share
of loans in forbearance declined for the second week in a row, led by the third
straight drop in GSE loans
,” said Mike Fratantoni, MBA’s Senior Vice President
and Chief Economist. “Many borrowers initially received a three-month
forbearance term, and as of June 21, 17 percent of loans in forbearance have
now been extended, with the largest share of those being Ginnie Mae
loans.” 

Added Fratantoni,
“The level of forbearance requests remains quite low as of mid-June. The
rebound in the housing market is likely one of the factors that is providing
confidence to both potential homebuyers and existing homeowners during these
troubled times.”  

Forbearance
requests as a percent of servicing portfolio volume (#) decreased across all
investor types: from 0.15 percent to 0.14 percent. although the percentage of
calls regarding forbearance increased from 7.7 to 7.8 percent.

MBA’s latest
Forbearance and Call Survey covers the period from June 15 through June 21,
2020 and represents 76 percent of the first-mortgage servicing market (38.2
million loans).

By Jann Swanson , dated 2020-07-01 08:16:15

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Courtesy of Mortgage News Daily

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