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Mortgage Apps: Refis Show 3% Likely Inflection Point

August 19, 2020

Bottom Line: The 30-year fixed-rate mortgage averaged 3.13% last week, up sharply from the week prior, when sub-3% rates were available to the best credits. Refinancing applications slipped in response. 3% will likely prove to be an "elbow," or inflection point, in the ability for borrowers to refinance going forward. On a trend basis, refis are well off their highs. However, they are still trending higher as Federal Reserve buying in the secondary market has reduced volatility and slowly given mortgage bankers confidence to push primary market rates closer to secondary market rates. Since the highs of November 2018, mortgage rates are down nearly 200bps. Purchase applications ticked slightly higher last week. On a trend basis, purchase applications are in an uptrend, but the momentum has slowed notably in recent weeks. That loss of momentum bears watching.

Separately, the MBA's Forbearance and Call Volume Survey showed a ninth straight week of declines in total loans in forbearance.

The MBA Mortgage Applications Index FELL by 3.3% during the week ended August 14 to 824.5, modestly above its 13 week average of 798.9 and 34.2% ABOVE its year-ago level.

The Purchase Index ROSE by 0.8% to 308.9, slightly above its 13 week average of 307.4 and 26.7% ABOVE its year-ago level.

The Refinance Index FELL by 5.3% to 3,810. With this decline, refinancing activity is modestly above its 13 week average of 3,650 and 38.3% ABOVE its year-ago level.

Contract Mortgage Rates ROSE with the 30-year fixed rate increasing by 7 bps to 3.13% and the 15-year fixed rate increasing by 6 bps to 2.73%.

Key findings of MBA's Forbearance and Call Volume Survey - August 3 to August 9, 2020

  • Total loans in forbearance decreased by 23 basis points relative to the prior week: from 7.44% to 7.21%.
    • By investor type, the share of Ginnie Mae loans in forbearance decreased: from 10.06% to 9.54%.
    • The share of Fannie Mae and Freddie Mac loans in forbearance decreased relative to the prior week: from 5.19% to 4.94%.
    • The share of other loans (e.g., portfolio and PLS loans) in forbearance increased relative to the prior week: from 10.12% to 10.34%.
  • By stage, 38.80% of total loans in forbearance are in the initial forbearance plan stage, while 60.49% are in a forbearance extension. The remaining 0.70% are forbearance re-entries.
  • Total weekly forbearance requests as a percent of servicing portfolio volume (#) decreased relative to the prior week from 0.12% to 0.11%.
  • Weekly servicer call center volume:
    • As a percent of servicing portfolio volume (#), calls increased from 7.8% to 7.9%.
    • Average speed to answer decreased from 2.8 minutes to 2.2 minutes.
    • Abandonment rates increased from 5.6% to 5.8%.
    • Average call length decreased from 7.6 minutes to 7.5 minutes.
  • Loans in forbearance as a share of servicing portfolio volume (#) as of August 9, 2020:
    • Total: 7.21% (previous week: 7.44%)
    • IMBs: 7.42% (previous week: 7.71%)
    • Depositories: 7.49% (previous week: 7.63%)
MBA's latest Forbearance and Call Volume Survey covers the period from August 3 through August 9, 2020, and represents 75% of the first-mortgage servicing market (37.3 million loans).

Article by Contingent Macro Advisors