May 13, 2010

Mortgage Bankers Weekly Update: Mortgage Applications Drop

Mortgage Bankers Association for the week of  5/12/2010

Market Composite Index: (loan application volume)   increased 3.9 percent on a seasonally adjusted basis from one week earlier

Refinance Index: increased 14.8 percent from the previous week and the seasonally adjusted Purchase Index decreased 9.5 percent from one week earlier.

Purchase Index:  decreased 8.9 percent compared with the previous week and was 0.6 percent lower than the same week one year ago.

Refinance Share of Mortgage Activity: increased to 57.7 percent of total applications from 51.9 percent the previous week

Arm Share: remained unchanged at 6.3 percent of total applications from the previous week.

MBA outlook: (Excerpted from

The recent plunge in rates on US Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefited US mortgage borrowers last week. Rates on 30 year mortgages dropped to their lowest level since mid-March.  As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks, said Michael Fratantoni, MBAs Vice President of Research and Economics.  In contrast, purchase applications fell almost 10 percent in the first week following the expiration of the homebuyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later

We predict that mortgage originations will fall to $1.37 trillion in 2010 from an estimated $2.1 trillion in 2009, a 35 percent decline.  Purchase originations will decline very slightly by around 3 percent to $717 billion, as home prices stabilize, and home sales increase.  Refinance originations will fall by about 52 percent to $656 billion in 2010 as mortgage rates are expected to rise through the year.  Refinance volumes in the first half of the year are likely to be somewhat higher than anticipated in prior forecasts as rates decreased sharply in recent weeks due to the crisis in Europe.  We have adjusted our refinance forecast upwards in response.

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