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Mortgage Apps: Sharp Rebound in Refis

February 3, 2021

Bottom Line: Applications rebounded sharply in the final week of January as borrowers responded sought refis after even a modest dip in rates. There's a clear "elbow" developing in the refinancing function around the 2 3/4% level on Freddie Mac's 30-year mortgage commitment rate. That corresponds with around 2.95% on the average reported rate from the mortgage bankers' survey. And it probably indicates that many borrowers with less than perfect credit or full documentation were still seeing rates over 3%. Those borrowers were likely quick to strike when their rate dropped below 3%, as likely happened last week. Overall, the mortgage market is back to its highly efficient ways in terms of refinancing. And purchase activity remains in an uptrend as demand for single-family homes remained strong to start 2021.

The MBA Mortgage Applications Index ROSE by 8.1% during the week ended January 29 to 981.1, sharply above its 13 week average of 876.8 and 43.9% ABOVE its year-ago level.

The Purchase Index ROSE by 0.1% to 334.6, modestly above its 13 week average of 324.4 and 17.9% ABOVE its year-ago level.

The Refinance Index ROSE by 11.4% to 4,746. Despite this increase, refinancing activity is sharply above its 13 week average of 4,147 and 59.5% ABOVE its year-ago level.

Contract Mortgage Rates were MIXED with the 30-year fixed rate declining by 3 bps to 2.92% and the 15-year fixed rate increasing by 1 bp to 2.44%.

Key findings of MBA's Forbearance and Call Volume Survey - January 18 to January 24, 2021

Total loans in forbearance remained unchanged relative to the prior week at 5.38%.
- By investor type, the share of Ginnie Mae loans in forbearance decreased relative to the prior week: from 7.61% to 7.51%.
- The share of Fannie Mae and Freddie Mac loans in forbearance decreased relative to the prior week: from 3.11% to 3.10%.
- The share of other loans (e.g., portfolio and PLS loans) in forbearance increased relative to the prior week: from 8.94% to 9.16%.
By stage, 18.07% of total loans in forbearance are in the initial forbearance plan stage, while 79.30% are in a forbearance extension. The remaining 2.64% are forbearance re-entries.
Total weekly forbearance requests as a percent of servicing portfolio volume (#) decreased relative to the prior week: from 0.07% to 0.06%.
Of the cumulative forbearance exits for the period from June 1, 2020 through January 24, 2021:
- 28.6% represented borrowers who continued to make their monthly payments during their forbearance period.
- 25.5% resulted in a loan deferral/partial claim.
- 15.6% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
- 13.4% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
- 7.5% resulted in a loan modification or trial loan modification.
- 7.5% resulted in loans paid off through either a refinance or by selling the home.
- The remaining 1.9% resulted in repayment plans, short sales, deed-in-lieus or other reasons.
Weekly servicer call center volume:
- As a percent of servicing portfolio volume (#), calls decreased from the previous week from 9.1% to 7.2%.
- Average speed to answer remained unchanged relative to the prior week at 2.4 minutes.
- Abandonment rates increased from 6.4% to 6.7%.
- Average call length remained unchanged relative to the prior week at 8.0 minutes.
Loans in forbearance as a share of servicing portfolio volume (#) as of January 24, 2021:
- Total: 5.38% (previous week: 5.38%)
- IMBs: 5.77% (previous week: 5.79%)
- Depositories: 5.37% (previous week: 5.36%)

MBA's latest Forbearance and Call Volume Survey covers the period from January 18 through January 24, 2021, and represents 74% of the first-mortgage servicing market (37.1 million loans).

Article by Contingent Macro Advisors