Mortgage Apps: Sharp Drop in Rates

Bottom Line: The 30-year fixed-rate mortgage was below 3% at points last week, averaging 3.06% with 2 7/8% rates available to the best credits. Refis turned sharply higher as borrowers reacted to the lower rates. On a trend basis, refis are well off their highs but 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 also ticked higher last week after several slow weeks. 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, especially since new lows in mortgage rates during the summer selling season should spur an acceleration in the trend. Finally, the selloff in bonds in the last two days will likely mean mortgage rates have found a floor for now. Separately, the MBA's Forbearance and Call Volume Survey showed a sixth straight week of declines in total loans in forbearance. The MBA Mortgage Applications Index ROSE by 6.8% during the week ended August 7 to 852.8, moderately above its 13 week average of 791.4 and 37.5% ABOVE its year-ago level. The Purchase Index ROSE by 2.0% to 306.6, slightly above its 13 week average of 303.6 and 21.4% ABOVE its year-ago level. The Refinance Index ROSE by 9.1% to 4,025. Despite this increase, refinancing activity is sharply above its 13 week average of 3,624 and 46.7% ABOVE its year-ago level. Contract Mortgage Rates FELL with the 30-year fixed rate declining by 8 bps to 3.06% and the 15-year fixed rate declining by 6 bps to 2.67%. Key findings of MBA's Forbearance and Call Volume Survey - July 27 to August 2, 2020

• Total loans in forbearance decreased by 23 basis points relative to the prior week: from 7.67% to 7.44%.
• By investor type, the share of Ginnie Mae loans in forbearance decreased: from 10.28% to 10.06%.
• The share of Fannie Mae and Freddie Mac loans in forbearance decreased relative to the prior week: from 5.41% to 5.19%.
• The share of other loans (e.g., portfolio and PLS loans) in forbearance decreased relative to the prior week: from 10.37% to 10.12%.
• By stage, 40.87% of total loans in forbearance are in the initial forbearance plan stage, while 58.43% are in a forbearance extension. The remaining 0.70% are forbearance re-entries.
• Total weekly forbearance requests as a percent of servicing portfolio volume (#) increased relative to the prior week from 0.10% to 0.12%.
• Weekly servicer call center volume:
  • As a percent of servicing portfolio volume (#), calls increased from 6.7% to 7.8%.
  • Average speed to answer increased from 2.4 minutes to 2.8 minutes.
  • Abandonment rates increased from 5.0% to 5.6%.
  • Average call length increased from 7.3 minutes to 7.6 minutes.
• Loans in forbearance as a share of servicing portfolio volume (#) as of August 2, 2020:
• Total: 7.44% (previous week: 7.67%)
• IMBs: 7.71% (previous week: 7.81%)
• Depositories: 7.63% (previous week: 7.95%)

MBA's latest Forbearance and Call Volume Survey covers the period from July 26 through August 2, 2020, and represents 75% of the first-mortgage servicing market (37.3 million loans).