Mortgage Application Volume Falls Despite Lower Rates

The solid 8.6 percent increase in mortgage application volume during the week ended April 16, only the fourth gain thus far in 2021, was short lived. The Mortgage Bankers Association reports that its Market Composite Index resumed a downward trend during the week ended April 23 even though mortgage rates moved lower. The index, a measure of mortgage application volume, decreased 2.5 percent on a seasonally adjusted basis and 2 percent unadjusted compared with the previous week.

The Refinance Index decreased 1 percent from the previous week and was 18 percent lower than the same week one year ago. Applications for refinancing remain the majority; the share last week increased to 60.6 percent of total applications from 60.0 percent the previous week.

The seasonally adjusted Purchase Index dropped by 5 percent from one week earlier and 4 percent unadjusted. It was 34 percent higher than the same week in 2020.  

"Mortgage applications decreased last week, even as mortgage rates dropped for the third week in a row. The 30-year fixed rate was down 3 basis points to 3.17 percent, which is still 32 basis points higher than the low reported in December 2020. Even with a few weeks of lower rates, most borrowers have likely already refinanced, which is why activity has decreased in seven of the last eight weeks," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The purchase market's recent slide comes despite a strengthening economy and labor market. Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks." 

The FHA share of total applications decreased to 10.7 percent from 11.3 percent the previous week and the VA share increased to 12.2 percent from 11.5 percent. The USDA share was unchanged at 0.4 percent. Origination balances were down slightly; the average balance was $330,000, $100 less than the previous week, while purchase mortgages averaged $400,100 compared to $406,100.

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming limit of $548,250 decreased to 3.17 percent from 3.20 percent, with points decreasing to 0.30 from  0.36. The effective rate was 3.26 percent. 

The rate for jumbo 30-year FRM, loans with balances greater than the conforming limit, dropped 6 basis points to 3.28 percent while points rose to 0.30 from 0.29. The effective rate dipped to 3.37 percent. 

Thirty-year FHA backed FRM had an average rate of 3.12 percent with 0.24 point. The prior week the rate was 3.15 percent with 0.31 point. The effective rate decreased to 3.19 percent.  

The rate for 15-year FRM fell to 2.55 percent from 2.65 percent, with points declining to 0.30 from 0.41. The effective rate was 2.63 percent.  

The 5/1 adjustable rate mortgage (ARM) rate dropped to 2.59 percent from 2.67 percent. Points decreased to 0.47 from 0.52 moving the effective rate down to 2.76 percent. The ARM share of activity dipped 0.01 point to 3.5 percent of total applications.

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.

The latest Forbearance and Call Volume Survey by MBA showed only a 1 basis point improvement in the share of forborne loans to 4.49 percent. As of April 18, there were an estimated 2.25 million  homeowners in forbearance plans. By stage, 12.9 percent of them are in their first plan term while 82.4 percent are in a forbearance extension. The remaining 4.7 percent are re-entries to the various programs.

The share of Fannie Mae and Freddie Mac loans was unchanged from the prior week at 2.44 percent. Ginnie Mae (FHA and VA) loans in forbearance decreased 7 basis points to 6.09 percent, while the forbearance share for portfolio loans and private-label securities (PLS) increased by 8 basis points to 8.42 percent. The percentage of loans in IMB servicer portfolios was the same as the prior week at 4.72 percent, and the percentage of loans in forbearance for depository servicers declined 3 basis points to 4.64 percent.

"After two weeks of large declines, the share of loans in forbearance decreased for the eighth straight week, but by only 1 basis point. New forbearance requests increased, and the rate of exits declined," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "More than 40 percent of borrowers in forbearance extensions have now exceeded the 12-month mark."

Among the homeowners who have exited forbearance since June 1, 2020, a quarter were borrowers who had continued to make their monthly payments while in forbearance and 7.5 percent paid off their loans either by refinancing or selling the home. Another 14.4 percent reinstated their loans by paying off the accrued past-due amounts.  Other results include 26.9 percent who accepted a loan deferral or partial claim, 14.6 percent exited with past due balances and without a loss mitigation plan while 9.6 percent had a loan or trial loan modification in place. The remaining 1.6 percent opted for repayment plans, short sales, deeds-in-lieu, or other outcomes.

MBA's latest Forbearance and Call Volume Survey covers the period from April 12 through April 18, 2021 and represents 74 percent of the first-mortgage servicing market (37 million loans).