U.S. MBA’s Mortgage Applications Index Rose to Five-Year High
By Dec. 31 (Bloomberg) — Mortgage applications in the U.S. last week reached a five-year high as borrowing costs slid.
The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose to 1,245.7, the highest level since 2003, from the prior week’s 1,245.4. The group’s purchase gauge climbed 1.4 percent and the refinancing measure fell 0.4 percent.
The drop in borrowing costs, sparked in part by the Federal Reserve’s plan to buy mortgage-backed securities, is the lone bright spot in a market plagued by record foreclosures and plunging home values. While lower rates will help owners reduce monthly payments, they have yet to stimulated sales, indicating the housing slump will persist for a fourth year.
“We’ve seen a bit of recovery in mortgage applications as borrowing costs are easing,” John Herrmann, president of Herrmann Forecasting LLC in Summit, New Jersey, said before the report. “The housing market has not yet reached a bottom. Sales and prices will continue to grind lower into next year.”
The Fed in November announced a program to reduce the cost and increase the availability of credit for homebuyers. Yesterday, the central bank selected four firms to manage a $500 billion purchase of mortgage-backed securities, to be completed by June. Only fixed-rate agency mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae are eligible assets for the program, the Fed said.
The mortgage bankers’ purchase index increased to 320.9 last week, from 316.5 the prior week. The measure reached an eight- year low of 248.5 in mid November and peaked at a record 529.3 in June 2005.
Refinancing
The refinancing gauge decreased to 6,733.8 from the prior week’s five-year high of 6,758.6.
The average rate on a 30-year fixed-rate loan dropped to 5.03 percent, the second-lowest level since records began in 1990, from 5.04 percent the prior week. At the current rate, monthly borrowing costs for each $100,000 of a loan would be about $539, or $91 less than the end of October, when the rate was 6.47 percent.
The share of applicants seeking to refinance loans slid to 82.9 percent of total applications, from a record 83.2 percent the prior week.
Today’s report also showed the average rate on a 15-year fixed mortgage decreased to 4.79 percent, the lowest level since March 2004, from 4.91 percent the prior week. The rate on a one- year adjustable mortgage dropped to 6.15 percent from 6.36 percent.
Mounting foreclosures and slumping sales are accelerating the drop in property values. Home prices in 20 major U.S. cities declined 18 percent in October from the same month last year, the most on record, the S&P/Case-Shiller index showed yesterday.
The Washington-based Mortgage Bankers Association’s loan survey, compiled every week since 1990, covers about half of all U.S. retail residential mortgage originations.
To contact the reporter on this story: Shobhana Chandra
Foreclosures climb in Central Texas
By Shonda Novak | Austin American Statesman
Foreclosure postings for the upcoming Jan. 9 auction are up in four Central Texas counties, with double-digit spikes in Travis, Bastrop and Williamson counties..
The elevated numbers for those and some other Texas counties are “somewhat surprising, since (mortgage giants) Fannie Mae and Freddie Mac had pledged to suspend foreclosure sales on occupied single-family homes until Jan. 9,” said George Roddy Sr., president of Foreclosure Listing Service Inc., the Addison-based firm that tracks the numbers.
Postings for January are up 73 percent in Bastrop County compared with a year ago, followed by increases of 58 percent in Travis County, 50 percent in Williamson County and 9 percent in Hays County. Roddy said recently that he thinks foreclosures have “pretty much peaked in Texas.”
Bonnie Brown, vice president of Foreclosure Listing Service, said she is at a loss to explain the spikes. She said about 75 to 80 percent of Fannie Mae and Freddie Mac foreclosure postings involve owner-occupied homes, leaving only 20 to 25 percent that could be foreclosed with the moratorium in effect.
“There’s obviously been no easing in the postings regarding the delinquent loans,” Brown said.
Brown said one theory is that lenders may be overloaded.
Although lenders have been encouraged to work with homeowners who are falling behind on their mortgages, and many are trying to, she said, “there’s simply such a large number of homeowners requesting loan modifications that the lenders, I think, are overwhelmed. And instead of being able to get answers to the borrowers about their loan modification requests, it’s taking six months and longer in many cases.”
In one case, a homeowner in the Denton area requested a loan modification in May, Brown said. The owner sent in all the required documentation, but didn’t hear back from the lender until October, with a letter saying her request had been accepted and paperwork outlining the new terms. A new loan was to go into effect Nov. 1, Brown said.
Yet, Brown said, the homeowner ” is still getting letters dunning her for the old monthly amount.”
“These lending institution are geared to make new loans, not to have these high delinquency rates,” Brown said. “And now they’re having to handle a large volume of requests to modify loans,” which she said involve ” a tremendous amount of paperwork.”
