Mortgage rates rose during the week ending August 14 and, while purchase applications sustained some of their momentum, a slowdown in refinancing pulled overall volume down. The Mortgage Bankers Association said its Market Composite Index, a measure of that volume, decreased 3.3 percent on a seasonally adjusted basis from one week earlier and was 4.0 percent lower on an unadjusted basis.
The Refinance Index decreased 5.0 percent from the previous week and was 38 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 64.6 percent of total applications from 65.7 percent the previous week.
The seasonally adjusted Purchase Index increased 1 percent from one week earlier but was 1 percent lower on an unadjusted basis. It was 27 percent higher than the same week one year ago, the 13th straight week of annual improvement.
“Positive economic data reported last week on retail sales, as well as a large U.S. Treasury auction, drove mortgage rates to their highest level in two weeks. The rise in rates dampened refinance activity, but purchase applications continued their strong run and were 27 percent higher than a year ago – the third straight month of year-over-year increases,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Conventional purchase applications drove last week’s increase, while applications for government loans decreased. The housing market remains a bright spot in the current economic recovery and these results, combined with July data on housing starts and homebuilder optimism, suggest that housing supply could be increasing to better meet the strong demand for buying a home.”
Applications for FHA mortgages declined to 10.3 percent of all received from 10.4 percent the prior week and the VA share ticked down to 11.2 percent from 11.4 percent. The USDA share was unchanged at 0.6 percent. The average loan size was $326,800, $500 larger than the previous week. Purchase loans averaged $367,800 compared to $364,300.
Rates, both contract and effective rate were mixed. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with balances at or below the conforming limit of $510,400 increased to 3.13 percent from 3.06 percent, with points increasing to 0.36 from 0.33. The effective rate increased.
Thirty-year FRM with jumbo loan balances that exceeded the conforming limit, had an average rate of 3.41 percent with 0.35 point. The previous week the rate was 3.40 percent with 0.31 point. The effective rate was also higher.
The rate for 30-year FRM backed by the FHA fell 7 basis points to 3.16 percent and points declined to 0.27 from 0.33. The effective rate also decreased.
The average contract interest rate for 15-year FRM increased to 2.73 percent from 2.67 percent, with points increasing to 0.36 from 0.35. The effective rate increased.
The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) ticked down 5 basis points to 2.95 percent while points grew to 0.41 from 0.30. This left the effective rate unchanged. The ARM share of applications remained at 2.7 percent.
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 reported a 23-basis point decline in the percentage of loans in forbearance last week, to 7.21 percent of servicers’ portfolio volume. This left an estimated 3.6 million homeowners in forbearance plans as of August 9.
The share of Fannie Mae and Freddie Mac loans in plans dropped for the 10th week in a row to 4.94 percent – a 25-basis-point improvement. The share of Ginnie Mae (FHA and VA) loans decreased by 52 basis points to 9.54 percent, while the forbearance share for portfolio loans and private-label securities (PLS) increased by 22 basis points to 10.34 percent. Depository servicers’ held forborne loans accounting for 7.49 percent of their portfolios and independent mortgage banks’ (IMB’) share decreased to 7.42 percent.
“More homeowners exited forbearance last week, leading to the ninth straight drop in the share of loans in forbearance. However, the decline in Ginnie Mae loans in forbearance was again because of buyouts of delinquent loans from Ginnie Mae pools, which result in these FHA and VA loans being reported in the portfolio category,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “In a sign that more FHA and VA borrowers are struggling with a very tough job market, more Ginnie Mae borrowers requested than exited forbearance.” Added Fratantoni, “The share of Fannie Mae and Freddie Mac loans in forbearance has dropped below 5 percent for the first time since April. Borrowers with conventional mortgages have been faring somewhat better throughout the current crisis, and there is no sign to date from these data that the risk to the GSEs is increasing.”
By stage, 38.80 percent of total loans in forbearance are in the initial forbearance plan stage, while 60.49 percent are in a forbearance extension. The remaining 0.70 percent are forbearance re-entries.
Total weekly forbearance requests as a percent of servicing portfolio volume (#) decreased relative to the prior week from 0.12 percent to 0.11 percent. The percentage of forbearance-related calls, however, increased from 7.8 percent to 7.9 percent.
MBA’s latest Forbearance and Call Volume Survey covers the period from August 3 through August 9 and represents 75 percent of the first-mortgage servicing market (37.3 million loans).