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

by devteam June 20th, 2012 | Share

Mortgage application volumernduring the week ended June 15 fell back only slightly from the 18 percent gainrnit scored a week earlier. The Mortgage Bankers Association said this morningrnthat its Market Composite Index decreased 0.8 percent on a seasonally adjustedrnbasis from the previous week and slightly more than 1 percent on an unadjustedrnbasis.  </p

Refinancingrnactivity increased to 81 percent of all applications from 79 percent the previousrnweek and the Refinancing Index rose one percent.  The seasonally adjusted Purchase Index howeverrnfell 9 percent; unadjusted it was down slightly more than 9 percent and was 2rnpercent lower than during the same week in 2011. </p

“Refinancernvolume increased again last week, but the composition of activity changedrnmarkedly.   Despite rates remaining near all-time lows, conventionalrnrefinance application volume declined, and the HARP share of refinance activityrndropped to 20 percent,” said Michael Fratantoni, MBA’s Vice President ofrnResearch and Economics.  “On the other hand, FHA refinance volume explodedrnto an all-time high, more than doubling over the week.  New, lower FHArnpremiums on streamlined refinance loans came fully into effect, and borrowersrnseized the opportunity to lower their mortgage rates without increasing theirrnFHA premiums.  Purchase activity fell off last week, but this is likelyrnonly a recalibration following the Memorial Day holiday, as the level ofrnactivity remains within the narrow band seen for the past 3 years.”</p

Purchase Index vs 30 Yr Fixed</b</p

ChartManager.loadChart(‘purchaseappschart’, ‘PurchaseMtgAppChart’);


Refinance Index vs 30 Yr Fixed</p

ChartManager.loadChart(‘refiappschart’, ‘RefiMtgAppChart’);


Mortgagernrates were mixed. The average contract interest rate for 30-year FRM with conforming loan balances ($417,500 or less) decreasedrnto 3.87 percent, matching the lowest rate in the history of the survey, fromrn3.88 percent, with points increasing to 0.49 from 0.43.  Jumbo 30-year FRM (balances greater thanrn$417,500) decreased to 4.06 percent, the lowest rate in the history of thernsurvey, from 4.12 percent, with points decreasing to 0.38 fromrn0.41.  The effective rates of both conformingrnand jumbo loans decreased.</p

Evenrnthough the interest rate for FHA-backed 30-year FRM increased one basis pointrnto 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-raternmortgages, from 3.23 percent with 0.48 point to 3.25 percent with 0.45 point. The effective rate also increased. </p

The 5/1rnadjustable rate mortgage (ARM) rate decreased to 2.75 percent, the lowest raternin the history of the survey, from 2.78 percent,<bwith points dropping to 0.33 from 0.49.  The effective rate decreased. The ARM sharernof application activity decreased to 4 percent of total applications.</p

Allrninterest rates are for 80 percent loan-to-value ratio loans and points includernthe origination fee.</p

MBArnreports that during the month of May investors filed 6 percent of applicationsrnfor home purchase mortgages, unchanged from April.  Investor activity in several regions didrnincrease, including East South Central and South Atlantic which were up by 0.5rnpercent. </p

Data isrnderived from MBA’s Weekly Mortgage Applications Survey which covers over 75rnpercent of all U.S. retail residential mortgage applications, and has beenrnconducted weekly since 1990.  Respondents include mortgage bankers,rncommercial banks and thrifts.  Base period and value for all indexes isrnMarch 16, 1990=100.

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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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