Before Brexit Storm, Mortgage Applications Fell 2.6 Percent

The Mortgage Bankers Association (MBA) reported on June 29 that total mortgage application volume fell 2.6 percent from the previous week. However, applications are up almost 38 percent on a year-over-year basis, mainly driven by refinance applications, which dropped 2 percent last week but surged 63 percent compared with the same week a year ago. Meanwhile, purchase applications were down 3 percent for the week but edged up 13 percent from a year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances declined from 3.76 percent to 3.75 percent, marking the lowest level since May 2013. "The Brexit vote led to a large drop in Treasury rates, about 20 basis points initially and an additional 10 basis points on Monday, before stabilizing somewhat on Tuesday," said MBA chief economist Michael Fratantoni. "Whether the impact of Brexit will be contained to the initial shock of the 'Vote Leave' victory or will have a longer-term impact on markets is unclear ... MBA's best guess at this point is that the impact on the mortgage market will be to keep mortgage rates lower for longer, leading to another pickup in refinance activity in the near future."

From "Before Brexit Storm, Mortgage Applications Fell 2.6 Percent"
CNBC (06/29/16) Olick, Diana

Some Mortgage Servicers Break U.S. Rules, Mostly Due to Technology: Consumer Bureau

The Consumer Financial Protection Bureau (CFPB) issued a report on June 22 revealing that some mortgage services fail to follow federal rules intended to help borrowers avoid foreclosure, mainly due to the use of faulty technology. According to the report, some servicers are giving homeowners wrong or outdated information or no information at all. CFPB examiners found misrepresentations of terms, fees, and deadlines for loans and modifications in recent communications from servicers, and some borrowers were not told they could appeal denials. The report does not name the servicers or provide statistics on the prevalence of rulebreaking, but it indicates that loss mitigation and transfers were the main problem areas. "Mortgage servicers can't hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules," said CFPB Director Richard Cordray. The CFPB will seek "specific and credible plans" from servicers as to how they will improve their technology and fix problems identified by examiners. However, the report indicates that some of the failures identified by CFPB examiners have been remedied.

From "Some Mortgage Servicers Break U.S. Rules, Mostly Due to Technology: Consumer Bureau"
Reuters (06/22/16) Lambert, Lisa

Friday Rate Update

Mortgage Rates Tick Up 

The rate for a 30-year fixed-rate mortgage averaged 3.56 percent this week, up from the previous week’s 3.54 percent, Freddie Mac said yesterday. At this time last year, the 30-year FRM rate averaged 4.02 percent.

This week’s 15-year FRM averaged 2.83 percent, up from 2.81 percent last week. A year ago, the 15-year FRM averaged 3.21 percent.

--ABA Daily Newsbytes

Millions of U.S. Consumers Escaping Subprime Credit

Fair Isaac Corp., or FICO, reports that the share of U.S. adults with subprime credit scores dropped 20.7 percent in April, marking the lowest level since at least 2005. This is the sixth consecutive year-over-year decrease and much less than the 25.5 percent peak in 2010 during the financial crisis. The trend is expected to bring relief to the big banks that tightened credit standards in the wake of the crisis, as a rise in more creditworthy borrowers would enable them to bolster lending without lowering standards and boost revenue at a time when their profits are being squeezed by super-low interest rates. "It will have a positive impact on loan volume, loan growth, and revenue," said Morgan Whitacre, consumer client underwriting executive at Bank of America. Observers believe credit card and auto lending would be the first types of loans to benefit. Meanwhile, defaults are near record lows. According to FICO, only 11.8 percent of borrowers were 90 days or more past due on at least one debt obligation during the 12 months through April, down from 13.3 percent during the 12 months through October 2013.

From "Millions of U.S. Consumers Escaping Subprime Credit"
Wall Street Journal (06/22/16) Andriotis, AnnaMaria

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Mortgage Applications Up 3 Percent on Lowest Rates in Three Years

The Mortgage Bankers Association reported on June 22 that total mortgage application volume rose 2.9 percent on a seasonally adjusted basis from the previous week, and applications are now up almost 35 percent from this time last year. Refinance applications climbed 7 percent from the previous week, while purchase applications slipped 2 percent for the week but jumped 12 percent on a year-over-year basis. Refinance applications accounted for 57.7 percent of total applications, up from 55.3 percent the previous week. Meanwhile, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell from 3.79 percent to 3.76 percent, marking the lowest level since May 2013.

From "Mortgage Applications Up 3 Percent on Lowest Rates in Three Years"
CNBC (06/22/16) Olick, Diana

Mortgage Refis Return as Interest Rates Plummet

Banks are feeling the pressure of declining long-term bond yields, but a potential bright spot is that lower rates are prompting more people to refinance mortgages or buy homes. Wells Fargo said on June 16 that it expects mortgage volume across the industry to rise 20 percent to 25 percent more for the year than the $1.5 trillion it initially forecast, and JPMorgan Chase said industry volume could surpass its initial forecasts by 50 percent. Observers note that the pickup in refinancing has been a surprise, as many expected mortgage rates to rise after the Federal Reserve's rate increase in December. It emphasizes the unpredictability of the mortgage market, as banks have found it difficult to anticipate loan demand and staffing levels. Wells Fargo has hired another 1,500 mortgage consultants since Jan. 1, and Chase has added several hundred employees, mostly in originations. However, it remains to be seen how aggressively banks will try to boost refinance and purchase volumes and how disciplined they will remain on holding the line on profitability within their mortgage businesses. Chase, Wells Fargo, and U.S. Bancorp have said they do not plan to lower minimum credit scores to drive up volume.

From "Mortgage Refis Return as Interest Rates Plummet"
Wall Street Journal (06/17/16) Andriotis, AnnaMaria; Glazer, Emily

Ellie Mae: Purchase Mortgages Now Make Up More Than 60 Percent of Closed Loans

Ellie Mae's latest Origination Insight Report shows that purchase mortgages accounted for 62 percent of all closed loans in May, marking the first time since August 2015 that the figure has surpassed 60 percent. This marks a gain from 59 percent in April. Meanwhile, refinances accounted for 37 percent of all closed loans, down from 40 percent in April. The report also shows that overall time to close rose from 44 days in April to 45 days in May, holding steady at 45 days for purchase loans, 44 days for refinances, and 45 days for Federal Housing Administration (FHA) loans. Closing rates for all loans climbed from 69 percent in April to 70 percent in May, rising from 65 percent to 67 percent for refinances and from 73 percent to 75 percent for purchase loans. Borrowers with FICO scores of at least 700 accounted for 69 percent of all purchases and refinances. The report also shows that 31 percent of purchase loans and 27 percent of refinances had FICO scores between 600 and 699. In addition, 82 percent of conventional loans and 39 percent of FHA loans had scores above 700.

From "Ellie Mae: Purchase Mortgages Now Make Up More Than 60 Percent of Closed Loans"
HousingWire (06/15/16) Ramírez, Kelsey

Fannie Mae: Almost No Lenders Plan to Ease Credit Standards

Fannie Mae's Second Quarter 2016 Mortgage Lender Sentiment Survey shows that 90 percent of the lenders polled have no plans to ease credit standards for at least the next three months. Lenders reported a "net easing" of credit standards for all loan types over the last three months but indicated that the easing is "moderate." For loans eligible for sale to Fannie Mae and Freddie Mac, only 4 percent of lenders expect to further ease credit standards in the next three months. The report reveals that lenders experienced a "significant increase" in net demand growth for refinance mortgages across all loan types from the first quarter to the second quarter, which is attributed to continued historically low mortgage rates. However, lenders expect refinance demand to decline during the remainder of the year. "Key survey sentiment indicators suggest that lenders remain cautiously optimistic in their market outlook," said Fannie Mae Senior Vice President and chief economist Doug Duncan. "The outlook for purchase demand growth over the next three months returned to levels similar to last year, while the outlook for refinance demand and profit margin improved moderately versus last year's levels."

From "Fannie Mae: Almost No Lenders Plan to Ease Credit Standards"
HousingWire (06/14/16) Lane, Ben

Underwater Mortgages Highest in Nevada, Florida, Illinois

Approximately 4 million U.S. homeowners owed a mortgage amount greater than the value of the property at the end of the first quarter of 2016, according to new data from CoreLogic. The number was down from 4.3 million underwater properties at the end of the fourth quarter of 2015. Florida had the second highest percentage of homes with negative equity at 15 percent, trailing Nevada at 17.5 percent. Among metro areas, Miami-Miami Beach-Kendall, Fla., had the second highest percentage of properties with negative equity after Las Vegas-Henderson-Paradise, Nev., at 19.9 percent. "More than 1 million homeowners have escaped the negative equity trap over the past year," said CoreLogic CEO Anand Nallathambi. "We expect this positive trend to continue over the balance of 2016 and into next year as home prices continue to rise."

From "Underwater Mortgages Highest in Nevada, Florida, Illinois"
24/7 Wall St. (06/09/16) Ausick, Paul

Mortgage Applications Jump 9.3 Percent as Rates Fall

The Mortgage Bankers Association (MBA) reported on June 8 that mortgage application volume rose 9.3 percent from the previous week as the anemic May jobs report pushed down interest rates. Refinance applications rose 7 percent from the previous week and nearly 14 percent from a year ago, while purchase applications surged 12 percent from the previous week but were down 6 percent from a year ago. "Given the weak employment report for May, we think it is unlikely that the [Federal Reserve] will raise rates in June," said MBA chief economist Mike Fratantoni. "However, as other economic data are pointing to continued economic growth, we do expect that they will increase rates following their July meeting." The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances dropped from 3.85 percent to 3.83 percent.

From "Mortgage Applications Jump 9.3 Percent as Rates Fall"
CNBC (06/08/16) Olick, Diana

Mortgage Applications Drop 4.1 Percent Over Fed Rate Uncertainty

The Mortgage Bankers Association (MBA) reported on June 1 that mortgage applications decreased 4.1 percent from the previous week despite strong buyer demand in the housing market. However, application volume is 42 percent higher than the same week a year ago. On a seasonally adjusted basis, refinance applications fell 4 percent from the previous week, and purchase applications tumbled 5 percent. Meanwhile, applications for low down payment government loans declined 6 percent to their lowest level since November. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances held steady at 3.85 percent. "Market expectations for a June Fed [rate] hike have increased recently, leading to a flattening of the yield curve, as short-term rates have risen more than longer-term rates. As a result, we saw an increase in rates for 15-year mortgages last week, even as rates on 30-year loans remained unchanged," said MBA chief economist Mike Fratantoni. "We have also seen the [adjustable-rate mortgage] share drop, as more borrowers opt for fixed-rate loans." Rising rates have pushed some jumbo loan borrowers out of the market, with the average loan size on refinances falling for three consecutive weeks.

From "Mortgage Applications Drop 4.1 Percent Over Fed Rate Uncertainty"
CNBC (06/01/16) Olick, Diana