Consensus Emerges on Languishing Mortgage Apps

by devteam April 7th, 2011 | Share

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the weekrnending April 1, 2011.</p

The MBA’s loan application survey covers over 50% of all U.S. residentialrnmortgage loan applications taken by mortgage bankers, commercial banks, andrnthrifts. The data gives economists a snapshot view of consumer demand forrnmortgage loans. In a falling mortgage rate environment, a trend of increasing refinancernapplications implies consumers are seeking out lower monthly payments. Ifrnconsumers are able to reduce their monthly mortgage payment and increaserndisposable income through refinancing, it can be a positive for the economy asrna whole (may boost consumer spending. Also allows debtors to pay down personalrnliabilities faster). A trend of declining purchase applications implies homernbuyer demand is shrinking.</p

Excerpts from the Release…</p

The Market Composite Index, a measure of mortgage loan application volume,rndecreased 2.0 percent on a seasonally adjusted basis from one week earlier. Onrnan unadjusted basis, the Index decreased 1.5 percent compared with the previousrnweek.   </p

The Refinance Index decreased 6.2 percent to its lowest level since Februaryrn25, 2011, on a seasonally adjusted basis.  The four week moving average is down 3.2rnpercent.  The refinance share of mortgage activity decreased to 61.2rnpercent of total applications from 64.3 percent the previous week. This is thernlowest refinance share since May 7, 2010. </p


The seasonally adjusted Purchase Index increased 6.7 percent to its highestrnlevel of the year.  The unadjustedrnPurchase Index increased 7.0 percent compared with the previous week and wasrn16.8 percent lower than the same week one year ago.  The four week moving average is up 0.9rnpercent. </p

“Purchase application volume increased last weekrnreaching the highest level of the year, but remains relatively low byrnhistorical standards, at levels last seen in 1997,” said Michael Fratantoni,rnMBA’s Vice President of Research and Economics. </p

“The increase last week was duernto a sharp increase in applications for government loans. Borrowers were likelyrnmotivated to apply before a scheduled increase in FHA insurance premiums thatrnbecame effective last Friday.” Fratantoni continued,</p


The average contract interest rate for 30-year fixed-raternmortgages increased to 4.93 percent from 4.92 percent, with points decreasingrnto 0.70 from 0.83 (including the origination fee) for 80 percent loan-to-valuern(LTV) ratio loans. The effective rate decreased from last week.<br /<br /The average contract interest rate for 15-year fixed-rate mortgages decreasedrnto 4.14 percent from 4.16 percent, with points increasing to 1.09 from 0.99rn(including the origination fee) for 80 percent LTV loans. The effective raternalso increased from last week.</p


“Rates were flat last week, but refinance activity fell, as the pool of borrowers who have both the incentive and the ability to qualify for a refinance continues to shrink.” said Michael Fratantoni, MBA’s Vice President of Research and Economics. Roughly 168 hours earlier, in the aptly titled piece : “Pool of Eligible Refinance Candidates Dried Up at Current Rates,” we shared similiar observations: “Recently lower mortgage rates have done little to motivate potential refinance candidates.” said MND’s Managing Editor Adam Quinones. “This isn’t a big surprise as most qualified borrowers simply don’t have an incentive to refinance because they already did last year when rates were near record lows. Other than that, qualification issues continue to prevent many folks from lowering their monthly payment. We do however expect a modest increase in purchase activity heading into the spring buying season.” </p

(incidentally, purchase apps picked up this week as refinance apps declined… Go figure…)</p

READ MORE: Pool of Eligible Refinance Candidates Dried Up at Current Rates</p

READ MORE: Refinance Demand Stale as Rates Rally

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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