Mortgage Industry See-Saws Amid Pandemic

David Deem

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Dave@DeemTeam.com

It's been a bit of an up-and-down scenario in the mortgage space since the coronavirus hit. While in general mortgage applications are down, according to the Mortgage Bankers Association (MBA), applications for new homes have increased YoY. Additionally, with unemployment a continued problem amid the health crisis, forbearance has become the only solution for many Americans with a mortgage. While forbearance rates have decreased, some of that can be attributed to servicers adding delinquent loans to their portfolios.

 
Here's the latest news:

Applications
 
According to the MBA's Weekly Mortgage Application Survey for the week ending Sept. 11, mortgage applications are down 2.5 percent on a seasonally adjusted basis from the previous week (reflecting an adjustment for the Labor Day holiday). Unadjusted, the Index decreased 13 percent compared to the previous week, and the Refinance Index decreased 4 percent (30 percent higher than the same week last year). The seasonally adjusted Purchase Index also decreased, down 1 percent from the previous week, while the unadjusted Purchase Index dropped 12 percent since the previous week (6 percent higher than the same week last year).
 
"Mortgage rates held steady last week, and the 30-year fixed rate—at 3.07 percent—has now stayed near the 3 percent mark for the past two months. A 5 percent decline in conventional refinances pulled the overall index lower, but activity was still 30 percent higher than last year. With the flurry of refinance activity reported over the past several months, demand may be slowing as remaining borrowers in the market potentially wait for another sizeable drop in rates," said Joel Kan, MBA's associate vice president of Economic and Industry Forecasting. "Applications to buy a home also decreased last week, but the underlying trend remains strong. Purchase activity has outpaced year-ago levels for 17 consecutive weeks, with a stronger growth in loans with higher balances pushing MBA's average loan size to a new survey high of $370,200."
 
For new-home applications, the MBA says they've increased 33.3 percent since last year. Comparing to July 2020, applications, however, applications decreased by 4 percent.
 
"The housing market continued to exceed expectations in August, as housing demand for new homes stayed strong and the job market continued to recover," said Joel Kan, MBA's associate vice president of Economic and Industry Forecasting. "Despite economic uncertainty and the pandemic's distortion to typical seasonal patterns, the comparisons to August 2019 show strength. Purchase applications increased over 33 percent, and MBA's estimate of new home sales were up over 11 percent. The seasonally adjusted annualized rate of sales was 871,000 units in August, the second strongest of the year and well above the 785,000 units sold a year ago."

Added Kan, "The new home market has maintained its path of recovery throughout the summer, and record-low mortgage rates and households seeking more space will likely continue to drive demand into the fall."
 
Forbearance
 
According to the MBA's latest Forbearance and Call Volume Survey, the total number of loans in forbearance decreased by 15 basis points to 7.01 percent as of Sept. 6. For the 14th consecutive week, the share of Fannie Mae and Freddie Mac loans in forbearance also decreased, dropping 15 basis points to 4.65 percent. Meanwhile, Ginnie Mae forbearance loans decreased 50 basis points to 9.12 percent.
 
"The beginning of September brought another drop in the share of loans in forbearance, with declines in both GSE and Ginnie Mae forbearance shares. However, at least a portion of the decline in the Ginnie Mae share was due to servicers buying delinquent loans out of pools and placing them on their portfolios. As a result of this transfer, the share of portfolio loans in forbearance increased," said Mike Fratantoni, MBA's senior vice president and chief economist. "Forbearance requests increased over the week, particularly for Ginnie Mae loans. With just under 1 million unemployment insurance claims still being filed every week, the lack of additional fiscal support for the unemployed could lead to even higher increases of those needing forbearance."

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