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Economic News

Mortgage application volume dips, lending remains tight

Applications decrease

According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, the volume of mortgage applications dropped 2.9 percent from the week prior, on a seasonally adjusted basis and is 4.3 percent lower than the same week in 2011. The share of mortgages that are refinances has been relatively level, coming in at 80 percent this week, down slightly from 81.3 percent of all mortgages applied for the week prior. Adjustable-rate mortgages (ARMs) increased slightly from 5.3 percent of mortgage applications to 5.6 percent over the week.

“The Federal Reserve surprised the market last week by indicating that short-term rates were likely to stay at their current low-levels until the end of 2014. Longer-term treasury rates dropped in response, and mortgage rates for the week were down slightly as a result,” said Michael Fratantoni, MBA’s vice president of research and economics. “Although total application volume dropped on an adjusted basis relative to last week, refinance volume remains high, with survey participants reporting that the expanded Home Affordable Refinance Program (HARP) contributed to roughly 10 percent of their refinance activity.”

The Texas Real Estate Center explains that lending will remain tight in 2012 as regulations have led to higher costs for mortgage servicers, high levels of uncertainty, difficulty in obtaining FHA loans, and general stigma that have demoralized the industry.

Average rates

According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.09 percent from 4.11 percent, with points decreasing to 0.41 from 0.47 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week.

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The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.33 percent from 4.39 percent, with points increasing to 0.41 from 0.40 (including the origination fee) for 80 percent LTVs. This is the lowest 30-year jumbo rate since MBA started tracking the series in January 2011. The effective rate also decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.96 percent from 3.97 percent, with points increasing to 0.61 from 0.57 (including the origination fee) for 80 percent LTVs. The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.36 percent from 3.40 percent, with points increasing to 0.41 from 0.40 (including the origination fee) for 80 percent LTVs. The effective rate also decreased from last week.

The average contract interest rate for 5/1 ARMs increased to 2.94 percent from 2.91 percent, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80 percent LTVs. The effective rate also increased from last week.

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

11 Comments

11 Comments

  1. Greg Cook

    February 2, 2012 at 2:39 pm

    Tara, interesting that everyone continues to refer to underwriting as "tight".
    Are they tight or prudent? Lender guidelines are not tighter than they were in the '80s and '90s before we "lost our way".

    If you take out the 2003-2006 window of our insanity, delinquency rates consistently ran between 2-3% from 1934 forward.

    Lenders are charged with proving that homebuyers have the ability and willingness to repay their loan.
    We tried it the other way and we all know how that turned out.

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