Mortgage application volume declined for the first time in four weeks during the week ended July 24. The Mortgage Bankers Association (MBA) said is Market Composite Index, a measure of that volume, was down 0.8 percent on a seasonally adjusted basis from the prior week and down 1 percent before adjustment.

The Refinance Index dipped 0.4 percent from the previous week although it was still 121 percent higher than the same week in 2019 and made up 65.1 percent of total applications. The share was 64.8 percent the previous week.

The seasonally adjusted Purchase Index ticked down 2 percent from one week earlier. The unadjusted index 1 percent lower week-over-week but up 21 percent on an annual basis.

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

 

"Mortgage rates remained near record lows for conventional loans last week, and refinances in the conventional sector continued to slightly increase. However, rates on FHA loans rose, leading to an almost 18 percent drop in FHA refinances," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Homebuyers stepped back slightly, and there was a larger drop in purchase application volume for FHA, VA, and USDA loans. This trend, along with the fact that average loan sizes are increasing, indicate that prospective first-time buyers are being impacted more by the rising economic stress caused by the resurgence in COVID-19 cases, as well as the uncertainty on how the next round of government support will take shape." 

The FHA share of total applications fell to 9.6 percent from 10.8 percent the previous week while the VA share rose from 10.8 percent to 11.2 percent. The USDA share was unchanged from 0.6 percent. The average loan size was $333,000 compared to $328,900 during the week ended July 17 and the size of new home purchase loans rose from $362,600 to $364,600.

Rates, both contract and effective, increased for all loan types except for conforming 30-year fixed-rate mortgages (FRM). The rate for those loans, with origination balances at or below the conforming limit of $510,400, was unchanged at 3.20 percent. Points increased to 0.37 from 0.35 and the effective rate increased. 

The rate for jumbo 30-year FRM, loans with balances exceeding the conforming limit, increased to 3.52 percent from 3.51 percent, with points increasing to 0.30 from 0.29.  

As Fratantoni noted, rates for 30-year FRM backed by the FHA spiked, rising 14 basis points to 3.27 percent. Points rose to 0.35 from 0.29.  

The average rate for 15-year FRM increased to 2.76 percent with 0.36 point. The prior week the rate was 2.71 percent with 0.35 point.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 3.08 percent from 2.89 percent, with points decreasing to 0.11 from 0.12. The ARM share of activity grew to 3.2 percent of total applications from 3.0 percent in each of the previous two weeks.  

MBA's Weekly Mortgage Applications Survey 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 said that, while the number of homeowners in forbearance plans continues to decline, the exodus has been most consistent for loans serviced for the GSE (Fannie Mae and Freddie Mac) portfolios.  The total number and share of active loans fell during the week ended July 19 for the sixth consecutive week, declining from 7.80 percent of servicer portfolios to 7.74 percent. MBA estimates there are now 3.9 million homeowners in forbearance.

The share of GSE loans remaining in plans fell 15 basis points to 5.49 percent. But while the GSE share of forborne loans fell for the 7th week, the share in the Ginnie Mae portfolio (VA and FHA loans) rose 1 basis point to 10.27 percent and were up 12 basis points to 10.53 percent among portfolio loans and private labor securities.

"The share of loans in forbearance declined by a smaller amount than in previous weeks, as the pace of borrowers exiting forbearance slowed," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Although the GSE portfolio of loans in forbearance should continue to improve, Ginnie Mae's portfolio saw an uptick of both loans in forbearance and borrowers requesting forbearance. The high level of unemployment claims in recent weeks may be playing a role, as weakness would likely impact Ginnie Mae's portfolio first."  

Added Fratantoni, "As a result of large buyouts from Ginnie Mae pools in recent weeks, many FHA and VA loans are now being held as portfolio loans by bank servicers. That is why the share of portfolio loans in forbearance has increased and is now typically at a higher level than that for Ginnie Mae loans." 

Total weekly forbearance requests as a percent of servicing portfolio volume (#) remained flat relative to the prior week at 0.13 percent but calls regarding forbearance increased for the third week. As a percent of servicing portfolio volume (#) those calls rose to 9.0 percent from 8.3 percent.

MBA's latest Forbearance and Call Volume Survey covers the period from July 13 through July 19 and represents 75 percent of the first-mortgage servicing market (37.3 million loans).