Purchase Applications Deflate After FHA Fee Hike

by devteam April 27th, 2011 | Share

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the weekrnending April 22, 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 increasingrnrefinance applications implies consumers are seeking out lower monthlyrnpayments. If consumers are able to reduce their monthly mortgage payment andrnincrease disposable income through refinancing, it can be a positive for therneconomy as a whole (may boost consumer spending. Also allows debtors to payrndown personal liabilities faster). A trend of declining purchase applicationsrnimplies home buyer demand is shrinking.</p

Excerpts from the Release…</p

The Market Composite Index, a measure of mortgage loan application volume,rndecreased 5.6 percent on a seasonally adjusted basis from one weekrnearlier.  On an unadjusted basis, the Index decreased 5.6 percent comparedrnwith the previous week. </p

The Refinance Index decreased 0.6 percent from the previous week. The fourrnweek moving average is down 3.2 percent.  The refinance share of mortgagernactivity increased to 61.6 percent of total applications from 58.5 percent thernprevious week. This is the highest refinance share of the month.  </p


The seasonally adjusted Purchase Index decreased 13.6 percent to its lowestrnlevel since February 25, 2011, driven by a 26.6 percent decrease in governmentrnpurchase applications.  The unadjusted Purchase Index decreased 12.8rnpercent compared with the previous week and was 28.8 percent lower than thernsame week one year ago.  The four weekrnmoving average is down 0.8 percent.</p


The average contract interest rate for 30-year fixed-rate mortgagesrndecreased to 4.80 percent from 4.83 percent, with points decreasing torn1.01 from 1.06 (including the origination fee) for 80 percent loan-to-valuern(LTV) ratio loans.  The effective rate also decreased from last week.<br /<br /The average contract interest rate for 15-year fixed-rate mortgagesrndecreased to 4.03 percent from 4.07 percent, with points decreasing torn0.96 from 1.02 (including the origination fee) for 80 percent LTV loans. Therneffective rate also decreased from last week.</p


“Purchase applications fell last week, driven primarily by a sharprndecrease in government purchase applications as new, higher FHA premiums wentrninto effect,” said Michael Fratantoni, MBA’s Vice President of Researchrnand Economics.  “This decrease reverses a 20 percent increase inrngovernment purchase applications over a four week period, which was likelyrndriven by borrowers attempting to beat this deadline.”</p

READ MORE: FHA Hikes Annual MIP Fee</p

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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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