The Mortgage Bankers Association (MBA) says there was little change in mortgage application activity during the week ended October 16. MBA's Market Composite Index, a measure of mortgage loan application volume, dipped 0.6 percent from the prior week on a seasonally adjusted basis and was down 1.0 percent unadjusted.

Refinancing was also flat. The Refinance Index increased 0.2 percent from the previous week although activity remained well ahead of a year earlier, up 74 percent. The refinance share of mortgage activity increased to 66.1 percent of total applications from 65.6 percent the previous week.

Applications for home purchasing fell for the fourth straight week, and for the seasonally adjusted index it has consistently been a 2.0 percent weekly decline. The unadjusted index was also down by 2.0 percent but was 26 percent higher than the same week one year ago.

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

"Mortgage rates increased last week, with the 30-year fixed rate climbing 2 basis points to 3.02 percent - the highest since late September. Despite the uptick in rates, refinance activity held steady, with FHA refinance applications posting a 17.6 percent increase, helping to offset declines in the other loan types," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Homebuyer demand remains strong this fall, but purchase applications did decrease 2 percent, with both conventional and government purchase activity taking a step back. Given the ongoing housing market recovery and low rate environment, both purchase and refinance applications remained robust compared to a year ago, rising 26 percent and 74 percent, respectively." 

The FHA share of total applications increased to 11.8 percent from 10.7 percent the previous week and the VA share fell to 12.6 percent from 13.4 percent. USDA's share decreased to 0.5 percent from 0.6 percent. The average balance of new loans increased from $319,700 to $320,400 and purchase loans grew from 368,500 to 372,000

Both contract and effective rates increased slightly across all mortgage types except FHA-backed 30-year loans. The average contract interest rate for 30-year fixed-rate mortgages (FRM)  with conforming loan balances of $510,400 or less increased, as Kan noted to 3.02 percent from 3.00 percent. Points increased to 0.36 from  0.32.  

The rate for 30-year FRM with balances exceeding the $510,400 conforming limit, increased to 3.33 percent from 3.30 percent. Points dropped to 0.30 from 0.35.

The FHA 30-year FRM remained flat at 3.12 percent with 0.35 point. The effective rate was also unchanged.

Fifteen-year FRM had an average rate of 2.61 percent with 0.31 point. The prior week the rate was 2.59 percent with 0.32 point.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 2.86 percent from 2.63 percent, with points unchanged at 0.58. The ARM share of activity decreased to 1.9 percent of total applications from 2.0 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.

There was another large decline in the percentage of the nation's mortgage loans in active forbearance. MBA's latest Forbearance and Call Volume Survey showed a 40-basis point decline week-over-week to 5.92 percent. According to MBA's estimate, 3.0 million homeowners remain in forbearance plans. By stage, 26.32 percent of total loans in forbearance are in the initial forbearance plan stage, while 72.08 percent are in a forbearance extension. The remaining 1.60 percent are forbearance re-entries.

The share of Fannie Mae and Freddie Mac loans in forbearance dropped for the 19th week in a row to 3.77 percent - a 26-basis-point improvement. The Ginnie Mae share decreased 13 basis points to 8.14 percent, while the forbearance share for portfolio loans and private-label securities (PLS) had the greatest improvement, a decline of 120 basis points to 8.86 percent.

The percentage of loans in forbearance for depository servicers decreased 60 basis points to 5.93 percent, and the percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 32 basis points to 6.33 percent.

"The share of loans in forbearance declined across all loan types, primarily because of borrower forbearance plans expiring at the six-month mark. Federally backed loans under the CARES Act are eligible to be extended for up to 12 months, but borrowers must contact their servicer for an extension. Without that contact, borrowers exit forbearance, whether they are delinquent or current on their loan," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Borrowers with federally backed mortgages should contact their servicer if they still have a hardship due to the pandemic."

Added Fratantoni, "The steady improvement for Fannie Mae and Freddie Mac loans highlights the improvement in some segments of the job market and broader economy. The slower decline for Ginnie Mae loans continues to show that this improvement has not been uniform, and that many are still struggling to regain their footing."

MBA's latest Forbearance and Call Volume Survey covers the period from October 5 through October 11, 2020 and represents 75 percent of the first-mortgage servicing market (37.3 million loans).