Mortgage applications continue fall with 2.2% drop – Refinancings drop 4% with purchases up 0.2%

declining

by Trey Garrison

Continuing the long-term trend this year, mortgage applications decreased 2.2% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 25, 2014.  

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.2% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 2% compared with the previous week. 

“Despite mortgage backed security issuance being up 38 percent from the first quarter average, the MBA index continues to show declines.  This suggests that there are fundamental shifts occurring in the market where big players (reporting to the MBA) may be giving up market share or perhaps not holding as many loans in portfolio, thereby pushing up the bond issuance,” said Quicken Loans Vice President Bill Banfield. “In either case, the current level of activity for purchases and refinances has been directional stronger in recent months based on actual security issuance.  With home prices stabilizing from a rapid level of appreciation and interest rates either falling or holding steady recently, I expect to see continued improvements in the purchase arena.”

The Refinance Index decreased 4% from the previous week.  The seasonally adjusted Purchase Index increased 0.2% from one week earlier. 

The unadjusted Purchase Index increased 1% compared with the previous week and was 12% lower than the same week one year ago.

The refinance share of mortgage activity decreased to 53% of total applications from 54% the previous week.  The adjustable-rate mortgage share of activity remained unchanged at 8% of total applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.33%, with points increasing to 0.24 from 0.23 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.  The effective rate increased from last week. 

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.22% from 4.21%, with points increasing to 0.23 from 0.20 (including the origination fee) for 80% LTV loans.  The effective rate increased from last week. 

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 4.03%, with points decreasing to 0.00 from 0.15 (including the origination fee) for 80% LTV loans.  The effective rate decreased from last week. 

The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.47%, with points decreasing to 0.25 from 0.28 (including the origination fee) for 80% LTV loans.  The effective rate remained unchanged from last week.

The average contract interest rate for 5/1 ARMs increased to 3.31% from 3.21%, with points increasing to 0.40 from 0.32 (including the origination fee) for 80% LTV loans.  The effective rate increased from last week. 

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FHA to Reduce Premiums for Certain Loans

Through a streamline refinance program, borrowers with FHA-endorsed loans may find it easier to lock in lower interest rates while paying less in fees.

Beginning June 11, 2012, FHA will lower upfront mortgage insurance premiums to .01 percent and reduce annual premiums to .55 percent for certain FHA borrowers, Carol Galante, acting FHA commissioner, announced today.

To be eligible, borrowers must to be current on their FHA-insured loans, which need to have been endorsed on or before May 31, 2009.

“This is one way that FHA can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today’s low interest rates,” said Galante. “By significantly reducing costs for these borrowers, we can make certain they cut their monthly mortgage burden which will benefit the housing market and the broader economy in the process.”

Currently, 3.4 million mortgages endorsed on or before May 31, 2009 pay more than a five percent in interest. The average FHA-insured borrower is estimated to save approximately $3,000 a year or $250 per month.

The streamlined process may also allow many borrowers to refinance without requiring additional underwriting. FHA-insured homeowners should contact their existing lender to determine eligibility.

Late last month, the FHA also announced plans to increase upfront and annual premiums on most other loans insured by FHA beginning in April to raise capital. Upfront premiums will increase to 1.75 percent from 1 percent, and annual premiums will increase 10 basis points and 35 basis points on mortgages higher than $625,500.

FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month.

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