Refinance Demand Remains At Multi-Year Highs, FHA Apps Surge

Mortgage application volume
during the week ended June 15 fell back only slightly from the 18 percent gain
it scored a week earlier. The Mortgage Bankers Association said this morning
that its Market Composite Index decreased 0.8 percent on a seasonally adjusted
basis from the previous week and slightly more than 1 percent on an unadjusted
basis. 

Refinancing
activity increased to 81 percent of all applications from 79 percent the previous
week and the Refinancing Index rose one percent.  The seasonally adjusted Purchase Index however
fell 9 percent; unadjusted it was down slightly more than 9 percent and was 2
percent lower than during the same week in 2011. 

“Refinance
volume increased again last week, but the composition of activity changed
markedly.   Despite rates remaining near all-time lows, conventional
refinance application volume declined, and the HARP share of refinance activity
dropped to 20 percent,” said Michael Fratantoni, MBA’s Vice President of
Research and Economics.  “On the other hand, FHA refinance volume exploded
to an all-time high, more than doubling over the week.  New, lower FHA
premiums on streamlined refinance loans came fully into effect, and borrowers
seized the opportunity to lower their mortgage rates without increasing their
FHA premiums.  Purchase activity fell off last week, but this is likely
only a recalibration following the Memorial Day holiday, as the level of
activity remains within the narrow band seen for the past 3 years.”

Purchase Index vs 30 Yr Fixed

Click Here to View the Purchase Applications Chart

Refinance Index vs 30 Yr Fixed

Click Here to View the Refinance Applications Chart

Mortgage
rates
were mixed. The average contract interest rate for 30-year FRM with conforming loan balances ($417,500 or less) decreased
to 3.87 percent, matching the lowest rate in the history of the survey, from
3.88 percent, with points increasing to 0.49 from 0.43.  Jumbo 30-year FRM (balances greater than
$417,500) decreased to 4.06 percent, the lowest rate in the history of the
survey, from 4.12 percent, with points decreasing to 0.38 from
0.41.  The effective rates of both conforming
and jumbo loans decreased.

Even
though the interest rate for FHA-backed 30-year FRM increased one basis point
to 3.72, points decreased to 0.47 from 0.59 and the effective rate decreased from the previous week.  Rates also increased for 15-year fixed-rate
mortgages, from 3.23 percent with 0.48 point to 3.25 percent with 0.45 point. The effective rate also increased.

The 5/1
adjustable rate mortgage (ARM) rate decreased to 2.75 percent, the lowest rate
in the history of the survey, from 2.78 percent,
with points dropping to 0.33 from 0.49.  The effective rate decreased. The ARM share
of application activity decreased to 4 percent of total applications.

All
interest rates are for 80 percent loan-to-value ratio loans and points include
the origination fee.

MBA
reports that during the month of May investors filed 6 percent of applications
for home purchase mortgages, unchanged from April.  Investor activity in several regions did
increase, including East South Central and South Atlantic which were up by 0.5
percent. 

Data is
derived from MBA’s Weekly Mortgage Applications Survey which covers over 75
percent of all U.S. retail residential mortgage applications, and has been
conducted weekly since 1990.  Respondents include mortgage bankers,
commercial banks and thrifts.  Base period and value for all indexes is
March 16, 1990=100.

…(read more)

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