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Lower Refinance Activity Drives Down Mortgage Application Levels

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A slowdown in refinancing brought about a slight decline in mortgage applications for the week ending January 15, according to the latest Mortgage Bankers Association (MBA) Weekly Mortgage Applications Survey.

The MBA’s Market Composite Index, which measures mortgage loan application volume, took a 1.9% slide on a seasonally adjusted basis from one week earlier, while the unadjusted index was down by 1%. This downward motion was primarily due to the 5% drop in the Refinance Index, although this index was also 87% higher than the same week one year ago. The refinance share of mortgage activity decreased to 72.3% percent of total applications from the previous week’s 74.8%.

Joel Kan, MBA's AVP of Economic and Industry Forecasting, pointed out that increases in both the 30-year and 15-year fixed rates “chipped away at demand” for refinancing. However, the seasonally adjusted Purchase Index was up by 3% from one week earlier while the unadjusted Purchase Index was up 9% compared with the previous week and was 15% higher than the same week one year ago.

“Purchase applications remained strong based on current housing demand, rising over the week and up a noteworthy 15% from last year,” Kan added. “Homebuyers in early 2021 continue to seek newer, larger homes. The average loan size for purchase loans jumped to $384,000, the second highest level in the survey.”

Among the federal programs, the FHA share of total applications decreased to 9.3% from 9.6% percent the week prior while the VA share of total applications decreased to 13.8% from 15.8% and the USDA share of total applications remained unchanged from 0.4% the week prior.

While fewer people were applying for mortgages, fewer homeowners were relying on forbearance plans to stay in their residences. The MBA’s latest Forbearance and Call Volume Survey determined the total number of loans now in forbearance for the week ending January 10 was 5.37%, down from the prior week’s level of 5.46%. The MBA estimated 2.7 million homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased to 3.13% - a 6-basis-point improvement. Ginnie Mae loans in forbearance decreased 18 basis points to 7.67%, and the forbearance share for portfolio loans and private-label securities (PLS) decreased by 9 basis points to 8.68%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 13 basis points from the previous week to 5.79%, and the percentage of loans in forbearance for depository servicers decreased 6 basis point to 5.33%.

Mike Fratantoni, MBA's SVP and Chief Economist, noted this week’s figures was “the largest and only the second decrease in the share of loans in forbearance in nine weeks, with declines across almost every tracked loan category.” But Fratantoni warned that continued weakness in the job market “means many homeowners who remain unemployed will need ongoing relief in the form of forbearance.”

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.

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