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Mortgage Rates Hit Record Lows but Applications Fell Flat

The volume of mortgage
applications dipped slightly last week. The Mortgage Bankers Association (MBA)
said its Market Composite Index, a measure of that volume, was down 0.7 percent
on a seasonally adjusted basis during the week ended October 9 and was 1
percent lower on an unadjusted basis.

The Refinance
Index slipped 0.3 percent
from the previous week and was 44 percent higher than
the same week one year ago. The refinance share of mortgage activity increased
to 65.6 percent of total applications from 65.4 percent the previous week.

The seasonally
adjusted Purchase Index decreased 2 percent from one week earlier and 1 percent
unadjusted. The Index was 24 percent higher than the same week one year ago,
continuing a string of year-over-year gains that started during the week ended
May 22.

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

 

“Mortgage
applications for refinances and home purchases both decreased slightly last
week, despite the 30-year fixed mortgage rate declining to a new MBA survey low
of 3.00 percent. Applications for government mortgages offset some of the
overall decline by increasing 3 percent, driven by a solid gain in government
purchase applications and an 11 percent jump in VA refinance applications,”
said Joel Kan, MBA’s Associate Vice President of Economic and Industry
Forecasting. “Refinance and purchase activity continue to run well ahead of
last year’s pace, fueled by record-low rates and strong homebuyer demand.
Housing supply is a challenge for many aspiring buyers, but activity should
continue to stay strong the rest of the year.” 
,

The
FHA share of total applications decreased to 10.7 percent from 11.0 percent the
prior week and the VA share grew to 13.4 percent from 12.2 percent.  The USDA share was up slightly to 0.6 percent.
The average loan size slipped to $ 319700 from $222,500 and the size of a purchase loan decreased
from $371,500 to $368,500.

The average contract interest rate for
30-year fixed-rate mortgages (FRM) with balances at or below the conforming
limits of $510,400 decreased to 3.00 percent from 3.01 percent. Points dropped
to 0.32 from  0.37 and the effective rate
declined. 

The average
contract interest rate for jumbo 30-year FRM, loans with balances exceeding the
conforming limit, was 3.30 percent with 0.35 point. The previous week the rate
was 3.31 percent with 0.30 point. The effective rate increased.

The
average contract interest rate for 30-year FRM backed by the FHA was unchanged from
the prior week at 3.12 percent. Points ticked up to 0.35 from 0.32 and the effective
rate increased.

Fifteen-year FRM rates were also flat at
2.59 percent. Points declined to 0.32 from 0.36 and the effective rate moved
lower.

The average
contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased 17
basis points to 2.63 with points
increasing to 0.58 from 0.34. The effective rate decreased from last week. The ARM
share of activity decreased to 2.0 percent of total applications from 2.2
percent the prior week.

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 confirms the sharp decline in the
number of forbearance plans that was reported late last week by Black Knight.
According to the MBA report, the total number of loans in plans dropped 49
basis points
to 6.32 percent of all active loans as of October 4. This leaves
3.2 million homeowners in forbearance.

The forborne share
of Fannie Mae and Freddie Mac loans declined for the 18th straight
week to

4.03 percent, a
36-basis-point improvement. Ginnie Mae (FHA/VA) loans decreased 89 basis points
to 8.27 percent, while the forbearance share for portfolio loans and
private-label securities (PLS) decreased by 33 basis points to 10.06 percent.
The percentage of loans in forbearance for depository servicers decreased 50
basis points to 6.53 percent, and the percentage of loans in forbearance for
independent mortgage bank (IMB) servicers decreased 54 basis points to 6.65
percent. 

“The share of
loans in forbearance declined across all loan types. With the forbearance
program for federally backed loans under the CARES Act reaching the six-month
mark, many borrowers saw their forbearance plans expire because they did not
contact their servicer. Another reason for expirations was that borrower
information needed to determine an appropriate loss mitigation option was not
yet in place,” said Mike Fratantoni, MBA’s Senior Vice President and Chief
Economist. “Borrowers with federally backed mortgages need to contact their
servicer to obtain another six months of reprieve if they are still impacted by
the pandemic. As of now, some borrowers are exiting forbearance without making
contact or without a plan in place
. Servicers are making outreach efforts to
attempt to work with these borrowers to determine the best options for them,
including an extension.”

Added Fratantoni,
“On a more positive note, nearly two-thirds of borrowers who exited forbearance
remained current on their payments, repaid their forborne payments, or moved
into a payment deferral plan. All of these borrowers have been able to resume -
or continue – their pre-pandemic monthly payments.”

MBA’s
latest Forbearance and Call Volume Survey covers the period from September 28
through October 4, 2020 and represents 74% of the first-mortgage servicing
market (36.8 million loans.)

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