Mortgage application activity slowed further during the week ended June 4, a short business week due to Monday's Memorial Day holiday. The impact of the holiday was magnified in annual comparisons because it occurred a week earlier in 2020. The Mortgage Bankers Association said its Market Composite Index, a measure of mortgage application volume, decreased 3.1 percent on a seasonally adjusted basis compared to the prior week and was down 13 percent on an unadjusted basis.

The Refinance Index decreased 5 percent from the previous week and was 27 percent lower than the same week one year ago. Refinancing made up 60.4 percent of application activity during the week. The share the previous week was 61.3 percent.

The seasonally adjusted Purchase Index ticked up 0.3 percent from one week earlier but was 11 percent lower on an unadjusted basis from the previous week and declined 24 percent from activity a year earlier.  

"Most of the decline in mortgage rates came late last week, with the 30-year fixed-rate mortgage declining to 3.15 percent. This likely impacted refinance applications, which fell 5 percent for both conventional and government loans. With fewer homeowners able to take advantage of lower rates, the refinance share dipped to the lowest level since April," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Purchase applications were up slightly last week, and the large annual decline was the result of Memorial Day 2021 being compared to a non-holiday week, as well as the big upswing in applications seen last May once pandemic-induced lockdowns started to lift."  

Added Kan, "The average loan size on a purchase application edged down to $407,000, below the record $418,000 set in February, but still far above 2020's average of $353,900. Home-price growth continues to accelerate, driven by favorable demographics, the recovering job market and economy, and housing demand far outpacing supply." 

The FHA share of total applications dipped to 9.5 percent from 9.6 percent the previous week and the VA share rose to 11.2 percent from 10.9 percent. The USDA share was unchanged at 0.4 percent. As Kan noted, the average origination balance for purchase loans slipped last week, but overall balances rose from an average of $337,200 the prior week to $338,000.  

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances of $548,250 or less decreased to 3.15 percent from 3.17 percent. Points were reduced from 0.39 to 0.34 and the effective rate declined to 3.24 percent.

The rate for jumbo 30-year FRM, loans with balances exceeding the conforming limit, was 3.29 percent with 0.32 point. The prior week the rate was 3.34 percent with 0.38 point. The effective rate was 3.38 percent.

Thirty-year FRM backed by FHA had an average rate of 3.12 percent, 4 basis points lower than the previous week. Points increased to 0.34 from 0.30 and the effective rate declined to 3.22 percent.

The rate for 15-year FRM decreased to 2.52 percent from 2.56 percent and points dipped to 0.29 from 0.31. The effective rate declined to 2.59 percent.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) was unchanged 2.54 percent, with points increasing to 0.30 from 0.29. The effective rate was also unchanged at 2.65 percent. The ARM share of activity increased to 3.9 percent of total applications from 3.7 percent a week earlier.

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 puts the total number of loans now in forbearance at 2.1 million or 4.18 percent of all loans in servicer portfolios. This is down 2 basis points from the prior week. By stage, 11.1 percent of total loans in forbearance are in the initial forbearance plan stage and 83.2 percent are in a forbearance extension. The remaining 5.7 percent are forbearance re-entries. 

The share of GSE (Fannie Mae and Freddie Mac) and Ginnie Mae (FHA and VA) loans in forbearance plans each declined by 1 basis point to 2.18 percent and 5.54 percent of those portfolios respectively. The forbearance share for portfolio loans and private-label securities (PLS) fell 6 basis points to 8.31 percent. The percentage of loans in forbearance in independent mortgage bank (IMB) servicer portfolios was 2 basis points lower at 4.34 percent, and the percentage of loans in forbearance for depository servicers decreased 1 basis point to 4.33 percent.

"The share of loans in forbearance declined for the 14th straight week, with small drops across most investor types and all servicer types," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Forbearance exits dropped to 6 basis points, the lowest weekly level since mid-February, but new forbearance requests, at 4 basis points, matched the recent weekly low from early May."  

Added Fratantoni, "Although the headline employment growth number for May was lower than many had anticipated, other data show evidence of a strengthening job market. That is good news for homeowners who have been struggling and are looking for work, as more families can regain their incomes and start making their mortgage payments again."

MBA's latest Forbearance and Call Volume Survey covers the period from May 24 through May 30, 2021 and represents 74 percent of the first-mortgage servicing market (37.0 million loans).