After three weeks of gains, refinancing activity fell last week, pulling overall mortgage volume lower. The Mortgage Bankers Association (MBA) says its Market Composite Index, a measure of mortgage loan application volume, decreased 4.2 percent on a seasonally adjusted basis during the week ended May 21 and was down 4.0 percent from one week earlier.

The Refinance Index dropped 7 percent from the previous week and was 9 percent lower year-over-year. Refinancing's share of mortgage applications decreased to 61.4 percent of total applications from 63.3 percent during the week ended May 14. .

The seasonally adjusted Purchase Index gained 2 percent compared to the previous week. On an unadjusted basis it was 1 percent higher week-over-week but lost 4 percent compared to the same period in 2020.

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

"Mortgage applications decreased last week as mortgage rates increased to 3.18 percent. Refinances dropped 7 percent as a result, driven by declines in both conventional and government refinance activity," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Purchase applications increased for the second time in three weeks, rebounding after a rather weak April with mostly weekly declines. While purchase activity was around 4 percent lower than a year ago, the comparison is to last spring's large upswing in activity as pandemic-related lockdowns lifted. Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices."

The FHA share of total applications decreased to 9.1 percent from 9.2 percent and the VA share dipped by 0.8 point to 11.2 percent. The USDA share was remained at 0.4 percent. The average origination balance of mortgages was unchanged from the prior week at $338,500 while the balance of a purchase mortgage declined to $409,700 from $411,400.

The contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances of $548,250 or less increased to an average of 3.18 percent from 3.15 percent. Points dipped to 0.35 from  0.36 and the effective rate rose to 3.28 percent. 

Jumbo 30-year FRM, loans with balances exceeding the conforming limit, had a rate of 3.30 percent, down from 3.31 percent the prior week. Points averaged 0.30 compared to 0.27 and the effective rate was unchanged at 3.39 percent. . 

The rate for 30-year FRM backed by the FHA was typically 3.20 percent with 0.25 point. The previous week's rate was 3.13 percent with 0.30 point. The effective rate was 3.27 percent. .

Rates for 15-year FRM dipped 1 basis point to 2.53 percent and points decreased to 0.27 from 0.32. The effective rate decreased to 2.60 percent. .

The rate for 5/1 adjustable rate mortgages  (ARMs) jumped to 2.81 percent from 2.58 percent with points increasing to 0.29 from 0.25. The effective rate rose to 2.92 percent.  The ARM share of activity increased to 4.0 percent from 3.9 percent.

MBA's Weekly Mortgage Applications Survey has been conducted since 1990 and covers over 75 percent of all U.S. retail residential applications Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.

MBA's latest Forbearance and Call Volume Survey put the total number of loans now in forbearance at about 2.1 million or 4.22 percent of loans in servicers' portfolios, only a 3 basis point decline from the prior week. By stage,11.8 percent of those loans are in their initial forbearance stage, while 82.9 percent are in a forbearance extension. The remaining 5.3 percent are program re-entries.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased 3 basis points to 2.21 percent and Ginnie Mae (FHA and VA) loans declined 2 basis points to 5.59 percent. The forborne share of portfolio loans and private-label securities (PLS) remained essentially the same as the prior week at 8.26 percent. The percentage of loans in forbearance in independent mortgage bank (IMB) servicers' portfolios was down 4 basis points to 4.38 percent and those serviced by depository servicers remained at 4.35 percent.

"The share of loans in forbearance declined for the 12th straight week, dropping by 3 basis points. The decline was smaller than the prior week due to a slower pace of forbearance exits," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Although the overall share is declining, there was another increase in forbearance re-entries. Currently, 5.3 percent of loans in forbearance are homeowners who had cancelled forbearance but needed assistance again."

Added Fratantoni, "The job market is recovering, but the pace of recovery thus far is slower than we had forecasted. Continued job growth is needed to help more struggling homeowners get back on their feet."

MBA's latest Forbearance and Call Volume Survey covers the period from May 10 through May 16, 2021 and represents 74 percent of the 37.1 million first mortgages being serviced.