Refinancing Applications Jump by Double Digits

Refinancing activity spiked during the week ended May 11, rising 13.0 percent from the previous week’s level according to the Weekly Mortgage Applications Survey released this morning by the Mortgage Bankers Association (MBA).   Refinancing represented 74.9 percent of all applications compared to 72.1 percent the previous week.  The increase drove the Market Composite Index, a measure of mortgage application volume, up 9.2 percent on a seasonally adjusted basis and 8.7 percent unadjusted from the week ended May 4. 

Refinancing more than offset a 2.4 percent dip in both the seasonally adjusted and the unadjusted Purchase Indices on a weekly basis. The unadjusted index was 1.0 percent lower than during the same week in 2011.

The four week moving averages for all indices were up.  The Market Index rose 1.77 percent, the seasonally adjusted Purchase Index 1.57 percent, and the Refinance Index 1.88 percent. 

“A flare up of the sovereign debt troubles in Europe once again led investors to flee to the safety of US Treasury securities last week.  As a result, mortgage rates have reached new lows in our survey, and refinancing application volumes picked up substantially as a result,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “Survey participants indicated that this was not due primarily to HARP volume – the HARP share of refinances fell to 28 percent of refinance applications, down relative to last week and last month, when the share was just above 30 percent in April.  The increase in refinance activity last week was concentrated in the conventional sector, which was up around 14 percent for the week, while government refinance applications were up only 4 percent.”Every fixed rate covered by MBA established a new record low during the week and the effective rate of most loans was also down.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,500 or less) dropped to 3.96 percent from 4.01 percent, with points decreasing to 0.37 from 0.41.

Purchase Index vs 30 Yr Fixed

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Refinance Index vs 30 Yr Fixed

Click Here to View the Refinance Applications Chart

The average contract interest rate for 30-year FRM with jumbo loan balances (greater than $417,500) decreased 9 basis points to 4.20 percent with points remaining unchanged at 0.36.

The rate for 30-year FHA-backed FRM fell to 3.75 percent from 3.81 percent, with points increasing to 0.66 from 0.45. This was the only product for which the effective rate increased.

The 15-year fixed-rate mortgage rate decreased to 3.26 percent from 3.29 percent, with points increasing to 0.41 from 0.32.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased to 2.80 percent from 2.83 percent, with points increasing to 0.37 from 0.36.  Applications for all  types of ARMs accounted for 5.4 percent of application volume, down from 5.7 percent. 

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

During the month of April, the investor share of applications for home purchase was at 5.7 percent, unchanged from March.  The Pacific region has the largest investor share of applications for home purchase at 9.5 percent. In addition, the share of purchase mortgages for second homes decreased to 5.7 percent in April from 5.8 percent in March.

The Mortgage Application Survey 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.

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MBA: Application Volume Flat, Rates Directionless as Month Ends

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey reported this morning that applications for home purchase mortgages increased slightly during the week ended April 27 but were largely offset by a drop in applications for refinancing.  The Market Composite Index, a measure of overall application volume, increased 0.1 percent on a seasonally adjusted basis and 0.4 percent unadjusted from the previous week.

Applications for refinancing were down 0.7 percent from the week ended April 20 while the seasonally adjusted Purchase Index rose 2.9 percent and the unadjusted Purchase Index increased 3.7 percent.  The latter measure was 3.0 percent higher than during the same week in 2011.  The four week moving averages of the Market Composite Index and Refinance index were up 0.09 percent and 0.75 percent respectively while the seasonally adjusted Purchase Index was down 1.77 percent.

Applications for refinancing constituted a 72.6 percent share of all applications, down from 73.4 percent the previous week.  The government share of purchase applications was unchanged at 37 percent and has remained at this approximate level, the lowest share since 2009, for the past three weeks.  

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 rate for a conforming (balance under $417,500) 30-year fixed-rate mortgage (FRM) increased to 4.05 percent with 0.44 point from 4.04 percent with 0.40 point and the rate for jumbo mortgages (balances over $417,500) increased to 4.32 percent from 4.27 percent with points decreasing to 0.38 from 0.44.  Effective rates increased for both types of loans.

Rates for FHA-backed 30-year FRM decreased to 3.80 percent with 0.50 point from 3.81 percent with 0.52 point and 15-year FRM were down to 3.31 percent from 3.32 percent with points unchanged at 0.41 percent.  The effective rates were both down and the contract rates for each were the lowest in the history of the survey.   

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 2.87 percent from 2.81 percent, with points decreasing to 0.35 from 0.37.  The effective rate increased from last week.

Rates are quoted for loans with loan-to-value rations of 80 percent and points include the application fee.

During the month of March, the investor share of applications for home purchase was at 5.7 percent, a slight decrease from 6.1 percent in February.  This change was led by a decline in the West South Central region.  In addition, the share of purchase mortgages for second homes remained constant at 5.8 percent.

The survey 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.

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March Loan Statistics Detailed in Ellie Mae Report

The second edition of a new report looking in depth at the mortgage origination market was released today by Ellie Mae.  The report for March reviews and compares data amassed from loan applications in its database for March compared to February 2012 and September and December 2011.  Ellie Mae States that there were two million loan applications processed through its systems in 2011 and the survey is based on a “robust” sample of those applications. 

The report outlines the characteristics of the loans for each of the four monthly periods.  Because of the volume of data contained in the report, we will summarize figures for February and note any substantial variations from the three earlier periods.

Sixty-one precent of loans originated in March were for the purpose of refinancing, about the same as three and six months previous but down from 67 percent in February.  FHA-backed loans accounted for 28 percent and conventional loans for 64 percent of the total compared to 25 percent and 67 percent in February.  A typical loan regardless of its purpose took 42 days to close in March, about the same as in February but down three to five days from December. 

The majority of loans were 30-year fixed-rate loans (FRM) but 20.2 percent were 15 year notes and 4.2 percent were adjustable rate mortgages (ARMs.)  The incidence of ARMs has decreased in each of the reporting periods since September when they had a 6.0 percent market share.  The average note rate for a 30-year FRM has declined steadily from 4.412 in September to 4.080 in March.

Ellie Mae calculated a “pull-through” rate for a sampling of loans for which applications had been submitted 90 days earlier.  The pull through for March was 47 percent with a higher percentage (56.4 percent) of purchase mortgages closing than loans for refinancing (42.1 percent.

The average loan closed in March had a FICO score of 749, a loan-to-value (LTV) ratio of 77 percent and a debt-to-income (DTI) ratio of 23/35.  A loan that was denied had a FICO on average of 699, an 85 percent LTV, and a DTI of 27/43.

 Jonathan Corr, chief operating officer of Ellie Mae said of the closed loan statistics, “In March, as we moved into the Spring selling season, underwriting standards for both purchase and refinance loans continued to be highly conservative.  The average loan denial in March still had a FICO score just shy of 700, and more than 15% in equity or a down payment.  On average, there was an 8-point spread between back-end DTI ratios for approved-versus-denied loans last month.”  Average denials for conventional refinances and purchases, he said, continued to have significantly higher FICOs, lower LTVs and more restrictive DTIs than the overall averages.

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Refinancing Applications Surge by Double Digits

The volume of mortgage refinancing soared during the week ended April 13 according to data released this morning by the Mortgage Bankers Association (MBA).   Its Weekly Mortgage Applications Survey reported that an increase in the Refinance Index of 13.5 percent drove the Market Composite Index up 6.9 percent on a seasonally adjusted basis and 6.5 percent unadjusted compared to the week ended April 6.

The increase in refinancing, which accounted for 75.2 percent of all mortgage applications during the week compared to 70.5 percent the previous week, more than offset a large drop in applications for purchase mortgages.  Those applications, due almost entirely to a pull-back in FHA business, were down 11.2 percent on a seasonally adjusted basis from the previous week and 10.4 percent unadjusted.  The Purchase Index was 13.9 percent lower than during the same week in 2011.

The four week moving average for the seasonally adjusted Market Index and the Refinance Index rose 1.60 percent and 2.36 percent respectively while the moving average for the seasonally adjusted Purchase Index was down 0.52 percent.

“Renewed concerns about sovereign debt in Europe led to a drop in rates last week, with the 30-year rate tying our survey low, reached in early February.  Refinance activity picked up in response, increasing 13.5 percent for the week.  Participants in our survey indicated that about 32 percent of this refinance volume was for HARP loans,” said Jay Brinkmann, MBA’s Chief Economist and SVP of Research and Education.  “While purchase activity declined sharply for the week, this was mostly due to a 23 percent drop in applications for FHA purchase loans.  This drop follows big increases in the demand for FHA loans over several weeks in anticipation of the FHA mortgage insurance premium increases that went into effect last week.  This was the largest weekly drop in the government purchase index since the expiration of the first-time homebuyer tax credit in May 2010.  The demand for conventional purchase loans was down only slightly.”

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

As Brinkmann indicated, all interest rates tracked by the MBA’s weekly survey declined during the week.  The rate for 30-year fixed-rate mortgages (FRM) decreased to 4.05 percent with 0.45 point from 4.10 percent with 0.43 points for loans with a balance of $417,500 and to 4.36 percent from 4.43 percent (with points unchanged at 0.36) for those with larger balances.  The average rate for 30-year FRM backed by the FHA decreased to 3.83 percent from 3.87 percent with points increasing from 0.55 to 0.61. 

The rate for 15-year FRM was down 4 basis points to 3.33 with points increasing to 0.41 from 0.37 and the rate for 5/1 adjustable rate mortgages (ARMS) was 2.83 percent with 0.35 point compared to 2.89  percent with 0.38 point. The market share of ARM during the week decreased to 5.3 percent from 5.5 percent of total applications.

The effective rate of all the loans referenced above decreased during the week.  Rates quoted are for loans with an 80 percent loan-to-value ratio and points included the origination fee.

In March the average loan size of purchase mortgages in the U.S. was $233,381, up from $225,463 in February. The average loan size for a refinance was $214,593, down from $222,048. The Pacific Region had the largest loans on average at $337,227 for purchases and $290,711 for refinancing. 

MBA’s weekly survey 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.

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Ellie Mae’s New Origination Report Reflects Tightening Credit Standards

A new monthly report on the state of the mortgage origination market has been initiated by Ellie Mae, a company which provides software and a mortgage origination network to mortgages originators.  The first report reviews and compares data amassed from loan applications in its database, for the months of August and November 2011 and February 2012.  Ellie Mae states that there were two million loan applications processed through its systems in 2011 and the survey is based on a 33 percent sample of those applications.

The report outlines the characteristics of the loans for each of the three months.  Because of the volume of data contained in the report, we will summarize figures for February and note any substantial variations from the earlier two periods.

Of loans originated in February, 67 percent were for the purpose of refinancing and 33 percent for purchase; 25 percent were for FHA backed mortgages and 67 percent for conventional loans.  Just under 20 percent of applications were for 15-year fixed-rate mortgages (FRM), a number that was fairly consistent across all three periods, but the share of adjustable rate mortgages (ARM) dropped by nearly 50 percent from August to February when ARM applications represented only 4.3 percent of applications.

To get a meaningful view of lender “pull-through”, Ellie Mae reviewed loan applications initiated within the previous 90 days to calculate a closing rate and found that nearly 48% of all applications closed. There were a higher percentage of purchase mortgages closing (60%) than refinances (42%).

The average loan took 44 days to close with refinanced loans averaging 48 days and purchase loans 44 days.  Closed loans had an average FICO score of 750 while loans that were denied averaged a FICO of 699.  Closed loans had a loan to value (LTV) ratio of 76 and a debt-to-income (DTI) ratio of 23/34 while denied applications averaged an LTV of 83 and a DTI of 28/44. 

There was substantial variation in these numbers for FHA vs. conventional loans that were accepted or denied.  Denied conventional applications had an average FICO of 720, LTV of 77 and DTI of 27/43 for refinancing and 732, 81, and 24/41 for purchase applications.  Applications denied for FHA refinancing had average FICOs of 667, LTVs of 87 and DTIs of 29/46 and for purchases 666, 94, and 40/46. 

There were also considerable differences between the characteristics for conventional loans that were closed and those that were denied with LTVs several points higher and back-end DTIs 10 to 12 points higher for denied loans and FICO scores around 50 points lower.  However, the only real difference between closed and denied FHA loans was the FICA scores, 55 points for refinances and 35 points for purchases.

February figures reflected some tightening of standards over the three periods in the study.  FICO scores on closed loans of all types rose 9 points over August figures while average LTV ratios were down 3 points and both front and back end DTI scores were 2 points lower.

 “In February, it appears that lenders continued to be very cautious in terms of credit quality, down payments and valuations,” said Jonathan Corr, chief operating officer of Ellie Mae. “The average credit score on closed loans was 750 last month, up from 740 six months ago; meanwhile, the average loan-to-value ratio was 76%, a decrease of 3% from August’s average.

“If you look at the full report on our website, you’ll see the impact of the higher underwriting requirements for refinance that were in place in February,” Corr said. “Last month, if your FICO score was below 720 or you had a down payment or equity of less than 25%, there was a good chance that your refinance application for a conventional loan was denied or you were offered a significantly less attractive interest rate. The average DTI ratio for such a denial in February was 27/43.

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