Mortgage Applications Fall For Third Straight Week

Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about Home Price Gains Outpace Wage Growth In 72% Of U.S. Cities. This week we’re bringing you:

Forbearance loans decrease for 18th straight week*

First time since March both Fannie Mae and Freddie Mac forbearance loans dropped below 2%

For the 18th straight week, servicers’ forbearance portfolio volume fell. It dropped four basis points to 3.87% last week, according to a survey from the Mortgage Bankers Association.

The MBA estimates 1.9 million homeowners are still in some form of a forbearance plan.

The share of Fannie Mae and Freddie Mac loans in forbearance also decreased three basis points to 1.99%, and Ginnie Mae loans decreased three basis points to 5.10%. The forbearance share for portfolio loans and private-label securities (PLS) decreased five basis points to 7.92%.

This is the first time since March that both Fannie Mae and Freddie Mac loans in forbearance dropped below 2%, said Mike Fratantoni, MBA’s senior vice president and chief economist.

“The rate of forbearance exits and new forbearance requests remained at low levels, but we expect the pace of exits to increase with reporting next week for the beginning of July,” Fratantoni said. “Strong job growth in June should provide a springboard for further improvements in the numbers over the next month.”

Read more in-depth here.

Massive Tappable Equity and More Record Price Gains -Black Knight Mortgage Monitor*

We recently summarized a report from the Urban Institute (UI) about the apparent reluctance of sellers to entertain offers from prospective buyers intending to use FHA or VA financing. UI based its conclusion on both a survey of real estate agents conducted by the National Association of Realtors and the recent decline in the FHA and VA share of originations. Black Knight, in its new Mortgage Monitor covering loan performance data for May, validates, to an extent, UI’s suggestion, using recent issuances of mortgage-backed securities (MBS).

The company says that Ginnie Mac’s securities, composed primarily of FHA and VA loans, represented about one third of the agency market before the pandemic. It has dropped to less than 25 percent in recent months. The loss has been driven in part by borrowers with higher balances, more equity, and better credit scores reacting to the opportunity offered by low rates and refinancing. Those borrowers are typically able to obtain GSE (Fannie Mae and Freddie Mac) mortgages. There has also been a trend of FHA borrowers, with increased equity, being able to refinance out of FHA mortgages and its lifetime requirement of paying into the mortgage insurance fund.

But Ginnie Mae’s share of purchase lending has also fallen, dropping below 40 percent in April and May for the first time in recent history. Like UI, Black Knight attributes this to the more rigid inspection standards required of FHA borrowers and the unwillingness of sellers to bet on a successful closing in the hypercompetitive market.

Read more in-depth here.

Mortgage applications fall for the third straight week*

Activity at the lowest level since the beginning of 2020

Mortgage applications decreased again, this time falling 1.8% in the week ending July 2, 2021, according to the latest report from the Mortgage Bankers Association.

This marks the third straight week of application declines and represents the lowest level since January 2020.

“Treasury yields have been volatile despite mostly positive economic news, including last week’s June jobs report, which showed ongoing improvements in the labor market,” said Joel Kan, MBA associate vice president of economic and industry forecasting. “However, rates continued to move lower, especially late in the week.”

Kan said the 30-year fixed rate was 11 basis points lower than the same week a year ago, and refinance applications have trended lower than 2020 levels for the past four months.

Those who are filling out purchase mortgage applications are requesting bigger loan amounts, but there are fewer applicants. It has most acutely affected first-time homebuyers.

Swift home-price growth across much of the country, driven by insufficient housing supply, is weighing on the purchase market and is pushing average loan amounts higher,” Kan said.

The refinance share of activity decreased to 61.6% of total mortgage applications from 61.9% the previous week. On an unadjusted basis, the market composite index decreased 1% compared with the previous week. The seasonally adjusted purchase index also decreased only 1% from one week earlier.

The FHA share of total mortgage applications remained increased to 9.8% from the week prior, and the VA share of total mortgage applications increased to 10.8% from 10.5%.

Read more in-depth here.

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