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Wary Consumers File 9.6% Fewer Loan Applications

Fewer homebuyers filed for mortgage loans last week, with applications falling on average by 9.6 percent from the week before, according to a weekly survey released Wednesday by the ""Mortgage Bankers Association"":http://www.mortgagebankers.org/default.htm (MBA). The news follows a 15-year bottom reached by mortgage applications last week, as consumer confidence and financial security continue to tank.


The MBA's Market Composite Index, a yardstick for mortgage loan applications nationally, declined by a seasonally adjusted 9.6 percent from the previous week and fell 10 percent on an unadjusted basis. The trade group indexed a 12.2-percent fall in refinancing activity. Also on a seasonally adjusted basis, the Purchase Index saw a rise in application volume by 0.9 percent, while it fell 1.3 percent on an unadjusted basis ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô 8.2 percent less than volume catalogued over the same period in 2010.

Commenting on the figures, Mike Fratatoni, VP of research and economics with the MBA, tells _MReport_ that he attributes the declines to ""tremendous volatility in the stock market [and] a lot of uncertainty around potential policy changes,"" making it ""difficult for a buyer to feel confident about the home purchase.""

He also says that refinancing activity saw a dip because ""a lot of mortgage borrowers can't qualify to refinance,"" adding that the job market continues to impact consumer confidence.

The throes of decline continued as the four-week moving average fell 3.8 percent on a seasonally adjusted basis for the Purchase Index, up 4.2 percent for the Refinance Index from last week. Meanwhile, the same average for the Market Index shifted upward by 2.5 percent on a seasonally adjusted basis.

Surging forward in recent weeks, refinancing activity for mortgage loans, until now responsible for a pickup in loan applications, fell from 79.8 percent to 77.8 percent of total applications.


Adjustable-rate mortgages (ARMs) rode a slight uptick to 7.1 percent, up from 6.2 percent of applications from the week before.

The MBA found average contract rates for 30-year fixed-rate loans limping back to 4.32 percent from 4.39 percent. Origination points for these benchmark mortgages leapt to 1.30 from 0.88 for 80 percent loan-to-value (LTV) ratio loans, while points for the 15-year hovered at around 1.00, the same from last week, with the effective rate decreasing. Contract rates for the 15-year fixed-rate mortgage fell on average to 3.49 percent, down from 3.56 percent.

The news about fewer mortgage applications continue trends for consumers, which surveys found feel less confident about a still-slacking jobs market and their own financial futures.

On Tuesday the ""Conference Board"":http://www.conference-board.org/, a leading gauge of consumer confidence, tracked historic declines, with more consumers agreeing with the statement that jobs are increasingly scarce in a tough market. The monthly ""Consumer Confidence Index"":http://finance.yahoo.com/news/The-Conference-Board-Consumer-prnews-848953388.html?x=0&.v=1 recorded that confidence, as measured on a 100-point scale, dipped to 44.5 from 59.2 over July, closing in on numbers not seen since the onset of the financial crisis in 2008.

Last week mortgage company ""Bankrate"":http://www.bankrate.com/ further dampened the national mood by releasing a related ""Financial Security Index"":http://www.bankrate.com/finance/consumer-index/aug-2011-financial-security-poll.aspx. Conducted by ""Princeton National Research Associates"":http://www.princetonresearchassociates.com/, the survey pooled overwhelmingly negative responses from consumers, with 34 percent of Americans calling their financial circumstances worse than the year before.

""Despite record low mortgage rates and home prices... consumers are still reluctant to take the plunge on a home purchase given the uncertainty about the economy,"" Greg McBride, a senior financial analyst with ""Bankrate"":http://www.bankrate.com/, tells _MReport_.

Referencing the financial security index, he describes the ongoing dearth in consumer confidence as one exacerbated by ""the stock market correction, the credit rating downgrade, and renewed worries aobut the recession.""

With unemployment at a 9-plus-percent high, ""most Americans aren├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ót buying into the economic recovery,"" he adds. ""The hub on the wheel is job growth. When we start to see consistent and significant growth in jobs, people will suddenly feel better about the economy.""

Whither mortgage loan applications?

Fratatoni says the MBA expects that application volume will approach 4.50 percent near the end of the year, forecasting the rates to hit 5.2 percent by the end of 2012.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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