Purchase Applications Drop Back to Mid-Spring Levels

By: Jann Swanson •

Mortgage applications, especially for home purchases, pulled back from the previous week's level. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 0.5 percent on a seasonally adjusted basis during the week ended November 6. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. 

Refinancing remained the strength of the Composite Index and that component gained 1 percent week-over-week and was 67 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 70.0 percent of total applications from 68.7 percent the previous week.

The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. On an unadjusted basis it was down 5 percent but remained 16 percent higher than the same week one year ago.

"Mortgage application activity was mixed last week, despite the 30-year fixed rate decreasing to 2.98 percent - an all-time MBA survey low. The refinance index climbed to its highest level since August, led by a 1.5 percent increase in conventional refinances," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The purchase market continued its recent slump, with the index decreasing for the sixth time in seven weeks to its lowest level since May 2020. Homebuyer demand is still strong overall, and activity was up 16.5 percent from a year ago. However, inadequate housing supply is putting upward pressure on home prices and is impacting affordability - especially for first-time buyers and lower-income buyers. The trend in larger average loan application sizes and growth in loan amounts points to the continued rise in home prices, as well as the strength in the upper end of the market."

The FHA share of total applications decreased to 10.6 percent from 11.1 percent the prior week and the VA share grew to 12.6 percent from 12.2 percent. USDA loans fell from an 0.5 percent share to 0.4 percent. Despite Kan's statement, average loan sizes declined slightly, from $321,700 for all loans to $319,100 and from $373,000 for purchase loans to $368,100.

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances at or below the conforming limit of $510,400 decreased to a survey low of 2.98 percent from 3.01 percent, with points decreasing to 0.35 from  0.38. The effective rate decreased from last week. 

The average contract interest rate for jumbo 30-year FRM, loans with balances exceeding the conforming limit, fell by 5 basis points to 3.13 percent. Points increased to 0.31 from 0.30 and the effective rate moved lower.

Thirty-year FRM backed by the FHA had a rate of 3.08 percent, unchanged from the prior week. Points increased to 0.37 from 0.26 and the effective rate increased.

The rate for 15-year FRM was also unchanged, remaining at 2.55 percent. Points rose to 0.37 from 0.35, pushing the effective rate higher.  

The average contract interest rate for 5/1adjustable rate mortgages (ARMs) rose to 2.79 percent from with 0.42 points. The prior week the rate was 2.67 percent, with 0.52 point. The effective rate was also higher. The ARM share of activity decreased to 2.0 percent of total applications from 2.1 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.

MBA's latest Forbearance and Call Volume Survey puts the total number of loans in forbearance as of November 1 at 2.8 million or 5.83 percent of loans being serviced. This is down 16 basis points from the 5.83 share during the prior week. By stage, 22.25 percent of total loans in forbearance are in the initial forbearance plan stage, while 75.99 percent are in a forbearance extension. The remaining 1.76 percent are forbearance re-entries.

The share of Fannie Mae and Freddie Mac loans in forbearance fell by 17 basis points to 3.49 percent, the 22nd straight weekly decline in those portfolios. Ginnie Mae (FHA/VA) loans decreased 18 basis points to 7.95 percent, and the forbearance share for portfolio loans and private-label securities (PLS) decreased by 12 basis points to 8.70 percent. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 8 basis points to 6.19 percent and the percentage of loans in forbearance for depository servicers decreased 26 basis points from the previous week to 5.60 percent.

"With declines in the share of loans in forbearance across the board, the data this week align well with the positive news from October's jobs report, which showed a gain of more than 900,000 private sector jobs, and a 1 percentage point decrease in the unemployment rate," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "A recovering job market, coupled with a strong housing market, is providing the support needed for many homeowners to get back on their feet."

Added Fratantoni, "However, the data continue to show that servicers are still having difficulties reaching borrowers who have reached the six-month point of their forbearance period. Servicers are required to get borrowers' consent to extend forbearance beyond six months. Homeowners who continue to be impacted by hardships related to the pandemic should contact their servicer."

MBA said, of the borrowers who exited forbearance from June 1 through November 1, 2020:

  • 31.6 percent continued to make their monthly payments during their forbearance period.
  • 23.6 percent resulted in a loan deferral/partial claim.
  • 16.9 percent were re-instated, that is paid back past-due amounts when exiting.
  • 12.0 percent had not made all of their monthly payments and exited forbearance without a loss mitigation plan in place.
  • 7.2 percent paid off loans through either a refinance or home sale.
  • 6.8 percent received a loan modification.
  • The remaining 1.9 percent resulted in repayment plans, short sales, a deed-in-lieu, or other outcomes.

MBA's latest Forbearance and Call Volume Survey covers the period from October 26 through November 1 and represents 74 percent of the first-mortgage servicing market (37.2 million loans).