Purchase Apps Climb as Borrowers Rush to Beat FHA Fee Hike

by devteam April 20th, 2011 | Share

The Mortgage Bankers Association (MBA) todayrnreleased its Weekly Mortgage Applications Survey for the weekrnending April 15, 2011.</p

The MBA’s loan application survey covers overrn50% of all U.S. residential mortgage loan applications taken by mortgagernbankers, commercial banks, and thrifts. The data gives economists a snapshotrnview of consumer demand for mortgage loans. In a falling mortgage raternenvironment, a trend of increasing refinance applications implies consumers arernseeking out lower monthly payments. If consumers are able to reduce theirrnmonthly mortgage payment and increase disposable income through refinancing, itrncan be a positive for the economy as a whole (may boost consumer spending. Alsornallows debtors to pay down personal liabilities faster). A trend of decliningrnpurchase applications implies home buyer demand is shrinking.</p

Excerpts from the Release…</p

The Market Composite Index, a measure ofrnmortgage loan application volume, increased 5.3 percent on a seasonallyrnadjusted basis from one week earlier. On an unadjusted basis, the Indexrnincreased 5.9 percent compared with the previous week. </p

The Refinance Index increased 2.7 percentrnfrom the previous week.  The four weekrnmoving average is down 5.7 percent.  The refinance share of mortgagernactivity decreased to 58.5 percent of total applications from 60.3 percent thernprevious week. This is the lowest refinance share since May 7, 2010. </p


The seasonally adjusted Purchase Indexrnincreased 10.0 percent to its highest level since December 3, 2010, drivenrnlargely by a 17.6 percent increase in Government purchase applications. Thernunadjusted Purchase Index increased 10.9 percent compared with the previousrnweek and was 11.4 percent lower than the same week one year ago. The four weekrnmoving average is up 2.5 percent. </p


The average contract interest rate for 30-yearrnfixed-rate mortgages decreased to 4.83 percent from 4.98 percent, withrnpoints increasing to 1.07 from 0.93 (including the origination fee) for 80rnpercent loan-to-value (LTV) ratio loans. The effective rate also decreased fromrnlast week.<br /<br /The average contract interest rate for 15-year fixed-rate mortgagesrndecreased to 4.07 percent from 4.17 percent, with points decreasing torn1.02 from 1.22 (including the origination fee) for 80 percent LTV loans. Therneffective rate also decreased from last week.</p


“Purchase application volume jumped last weekrnlargely due to another sharp increase in applications for government loans.rnBorrowers were likely motivated to apply for loans before the scheduledrnincrease in FHA insurance premiums,” said Michael Fratantoni, MBA’s VicernPresident of Research and Economics.  “Refinance activity increasedrnsomewhat, as rates dropped to their lowest level in a month towards the end ofrnthe week.”</p

READ MORE: FHA Hikes Annual MIP Fee</p

SEE MORE: Visualizing the Mortgage Rate 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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