Mortgage
application activity gave back much of the previous week’s gains as interest
rates increased. The Mortgage Bankers Association (MBA) said its Market
Composite Index, a measure of mortgage loan application volume, decreased 4.1
percent
on a seasonally adjusted basis during the week ended February 5 and was
down 3 percent before adjustment.

The
Refinance Index, which had surged by 11 percent during the last week in
January, was down 4 percent last week but was still 46 percent higher than the
same week one year ago. The refinancing share of overall activity decreased to
70.2 percent from 71.4 percent the previous week.

The
seasonally adjusted Purchase Index dropped 5 percent from one week earlier but
was up 2 percent from the prior week and 17 percent year-over-year on an
unadjusted basis.  

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

“Mortgage rates
have increased in four of the first six weeks of 2021, with jumbo rates being
the only loan type that saw a decline last week. Despite some weekly
volatility, Treasury rates have been driven higher by expectations of faster
economic growth as the COVID-19 vaccine rollout continues,” said Joel Kan,
MBA’s Associate Vice President of Economic and Industry Forecasting. “With the
30-year fixed rate increasing to 2.96 percent – a high not seen since last
November – refinances declined, and their share of total applications dipped to
the lowest level in three months. Government refinance applications did buck
the trend and increase, and overall activity was still 46 percent higher than a
year ago.
Demand for refinances is still very strong this winter.” 

Added Kan,
“Purchase applications cooled the first week of February, but homebuyers are
still very active. Purchase activity was 17 percent higher than last year, and
the average purchase loan size continued to increase, reaching another survey
high of $402,200, as the higher-priced segment of the market continues to
perform well.”

The
FHA share of total applications increased to 9.5 percent from 9.1 percent the
previous week and the VA share grew to 13.3 percent from 12.1 percent. The USDA
share was unchanged at 0.4 percent. The average purchase price dipped to
$332,400 from $332,100 and the balance of a purchase mortgage grew from
$398,600 to $402,200.

The
average contract interest rate for 30-year fixed-rate mortgages (FRM) with balances
at or below the conforming limit of $548,250 increased to 2.96 percent from
2.92 percent; Points increased to 0.36 from 
0.32 and the effective rate increased. 

The rate for jumbo 30-year
FRM, loans with balances exceeding the conforming limit, declined 1 basis point
to 3.11 percent. Points decreased to 0.29 from 0.32 and the effective rate also
moved lower.

Thirty-year FRM backed by
the FHA had a rate of 2.97 percent with 0.36 point. The prior week the rate was
2.94 percent with 0.29 point. The effective rate increased.  

The rate for 15-year FRM was
2.50 percent, up from 2.44 percent, with points decreasing to 0.29 from 0.32.
The effective rate increased from last week.

The average contract
interest rate for 5/1 adjustable-rate mortgages (ARMs) increased 4 basis points
to 2.92 percent and points declined to 0.36 from 0.46, leaving the effective
rate unchanged. The ARM share of activity increased to 2.3 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.

MBA’s latest Forbearance and Call Volume Survey showed
that the total number of loans now in forbearance decreased by 3 basis points
over the prior week. As of January 31, 5.35 percent of servicers’ portfolios
were in active plans, down from  5.38
percent a week earlier and equating to an estimated total of 2.7 million homeowners.
By stage, 16.52 percent of forborne loans are in their initial plan stage,
while 80.98 are in a forbearance extension. The remaining 2.50 percent are
forbearance re-entries. 

The
share of Fannie Mae and Freddie Mac loans in forbearance decreased to 3.07
percent – a 3-basis-point
improvement. The Ginnie Mae (FHA and VA) share of loans in forbearance
decreased 5 basis points to 7.46 percent. The forbearance share for portfolio
loans and private-label securities (PLS) decreased by 2 basis points to 9.14
percent. The percentage of loans in forbearance for independent mortgage bank
(IMB) servicers decreased 4 basis points to 5.73 percent, and those for depository
servicers decreased 1 basis point to 5.36 percent.

“The share of loans in forbearance decreased at the end
of January across all investor categories. Almost 14 percent of homeowners in
forbearance were reported as current on their payments at the end of last
month, but the share has declined nearly every month from 28 percent in May,” said Mike Fratantoni,
MBA’s Senior Vice President and Chief
Economist. “While
new forbearance requests increased slightly at the end of January, the rate of
exits picked up somewhat but remained much lower than in recent months. We are
anticipating a sharp increase in exits in March and April as borrowers hit the
12-month expiration of their forbearance plans.” 

Fratantoni added, “The job market rebounded
slightly in January following a decline in December, but there are still 6.5
percent fewer jobs in the U.S. economy compared to February 2020. The
proportion of long-term unemployed also remains troubling, with 4 million
people who have been actively looking for work for 27 weeks or more. These are
the homeowners who are likely to still be in forbearance and need additional
support until the job market recovers to a greater extent.”

MBA’s latest Forbearance and Call Volume
Survey covers the period from January 25 through January 31, 2021 and
represents 74 percent of the 37.0 million loans in the servicing market.

By Jann Swanson , dated 2021-02-10 08:19:30

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Courtesy of Mortgage News Daily

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