HARP Activity Increasing Even as Refinancing Contracts

Applications for purchase mortgages jumped during the week ended February 24, but the Mortgage Bankers Association's (MBA) Market Composite Index still finished the week down slightly from the week before.  The index, derived from the MBA's Weekly Mortgage Application Survey decreased 0.3 percent from the previous week on a seasonally adjusted basis and 9.4 percent unadjusted. The week's results are also adjusted for the Presidents Day holiday.

The Purchase Index increased 8.2 percent on a seasonally adjusted basis from the week ended February 17.  On an unadjusted basis it increased 0.9 percent from the previous week but was 4.3 percent lower than the same week in 2011. The Refinance Index was down 2.2 percent

The four week moving average for the seasonally adjusted Composite was up 0.33 percent and the moving average for the refinance index increased by 0.64 percent.  The moving average of the seasonally adjusted Purchase Index was down 0.96 percent. 

Refinancing accounted for 77.9 percent of all mortgage applications during the week compared to 80.1 the week before.  This was the lowest share for refinancing since December 2 and the first time refinancing dropped below an 80 percent level since December 9.

The government's Home Affordable Refinance Program (HARP) is starting to take hold in the  applications figures.  According to Michael Fratantoni, MBA's Vice President of Research and Economics, more than 20 percent of refinance applications last week were for HARP loans. "The HARP share of total refinance applications has increased over the past month," he said, and "purchase application volume increased over the week, but remains within the narrow and anemic range of activity we have seen since the expiration of the homebuyer tax credit in May 2010."

In January 86.4 percent of home purchase applications were for 30-year fixed-rate mortgages (FRM), 6.5 percent were for 15-year FRM, and 5.4 percent were for adjustable rate mortgages (ARM).  "Other" FRM with amortizations schedules other than 15 and 30-year terms represented 1.7 percent of all purchase applications.  The percentages of 15-year and ARM mortgages were down from December while the other two categories increased.

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

The average contract interest rate for conforming (balances under $417,500) 30-year FRM decreased from 4.09 percent with 0.53 point to 4.07 percent with 0.51 point and the effective rate decreased from the previous week.  Rates for the jumbo 30-year FRM - loans with balances over $417,500 - increased to 4.34 percent from 4.32 percent but points were down to 0.40 from 0.42.  The effective rate increased.   

Rates for 30-year fixed-rate mortgages backed by the FHA were down one basis point to 3.86 percent, the lowest rate of the year, but points jumped to 0.80 from 0.41. The effective rate increased.

Fifteen-year mortgage rates ticked down from 3.38 percent to 3.36 percent with points increasing to 0.38 from 0.37.  The effective rate decreased from the previous week.

The biggest rate change of the week was in 5/1 ARMs,  This rate decreased to 2.78 percent from 2.94 percent, with points decreasing to 0.38 from 0.44.  This is the lowest 5/1 ARM rate since MBA began tracking the series in January 2011.  The effective rate decreased.  Adjustable-rate mortgages had a 5.0 percent share of activity during the week compared to 5.3 percent the previous week.

 All rates are quoted for 80 percent loan-to-value mortgages and points include the origination fee.

MBA's weekly survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.