Mortgage Rates Drop Slightly But Delinquent Mortgage Payments Rise

Most interest rates continued their recent pattern of two steps up -one step back during the week ending March 16 (Freddie Mac) and March 17 (Mortgage Bankers Association.)

Freddie Mac, in its Weekly Primary Mortgage Survey, reported that all four of the mortgage products it tracks dropped, although by varying degrees. The two adjustable rate mortgage products (ARMs) showed the greatest decreases. The 1-year ARM was at 5.37 percent, down from 5.45 percent during the week ended March 9 while the 5/1-year ARM was down a full 10 basis points to 5.93 percent. Fees and points for both types of ARMs were unchanged at 0.8 and 0.7 respectively.

Fixed rate mortgages were down to a lesser degree. The 30-year fixed decreased from 6.37 percent to 6.34 percent while fees and point increased from 0.6 to 0.7 and the 15-year fixed was down from an even 6.0 percent of the previous week to 5.98 percent. Fees and points also went down from 0.6 to 0.7.

With all of the see-sawing of the last almost three months, there has actually been very little change in rates so far this year, especially fixed rates. The 30-year started 2006 at 6.21 percent and the 15-year at 5.76. The 5/1 ARM has run up 15 basis points and the 1-year ARM has increased 21 basis points since New Years.

The Mortgage Bankers Association's Weekly Mortgage Applications Survey reported similar rate averages for fixed rate products. The 30-year fixed decreased to 6.31 percent from 6.42 percent the previous week while points, including the origination fee, decreased from 1.14 to 1.13 for 80 percent loan to value loans.

The 15-year fixed mortgage rates averaged of 5.99 percent, down seven basis points from the week ended March 10. Points dropped substantially, from 1.19 to 1.09 over the week.

The 1-year ARM, however, increased from 5.64 percent to 5.68 percent although points were also down for this loan product, from 0.96 to 0.86.

Loan activity continued to drop compared to the application volume one year ago. The Market Composite Index was down 1.6 percent on both a seasonally adjusted and unadjusted basis from one week earlier, but was off 13.8 percent from the same week in 2005.

Refinancing as a share of overall mortgage activity increased a bit, from 37.7 percent to 38.1 percent and adjustable rate mortgages, understandably, continued to lose market share representing 28.3 of all applications compared to 28.8 a week earlier.

In other news, The Mortgage Bankers Association announced that more homeowners were falling behind on mortgage payments. The National Delinquency Survey released late last week reported that delinquencies on one-to-four unit residential properties was at 4.70 percent at the end of the fourth quarter of 2005 compared to 4.44 percent during the third quarter. At the end of the fourth quarter of 2004 4.38 percent of mortgagors were behind in their loan payments.

Homes that had actually slipped into foreclosure (loans are usually three to six months delinquent before that process actually begins, depending on the lender) declined 16 basis points from the same quarter in 2004 and was up two basis points from the third quarter of 2005. The seasonally adjusted rate of loans entering the process was also down slightly, four basis points, from 2004 and up only 1 basis point from the previous quarter.

The National Delinquency Survey covers over 41.2 million loans including 31.1 million prime loans, 5.5 million sub prime loans, and 4.6 million government loans.