Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 15, 2020.
Unadjusted, the Index decreased by 2 percent from the previous week. The Refinance Index also dropped 6 percent from one week earlier, and the seasonally adjusted Purchase Index increased 6 percent from the previous week. The unadjusted Purchased Index increased 6 percent from last week—1.5 percent lower than the same time last year.
“Applications for home purchases continue to recover from April’s sizeable drop and have now increased for five consecutive weeks. Purchase activity—which was 35 percent below year-ago levels six weeks ago—increased across all loan types and was only 1.5 percent lower than last year,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Government purchase applications, which include FHA, VA and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months. As states gradually reopen and both homebuyer and seller activity increases, we will be closely watching to see if these positive trends continue, or if they reflect shorter-term, pent-up demand.”
Added Kan, “Despite mortgage rates remaining close to record-lows, refinance activity slid to its lowest level in over a month. The average loan amount for refinances fell to its lowest level since January—potentially a sign that part of the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten. We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates. With many homeowners still facing economic and employment uncertainty, these refinance opportunities will allow them to save money on their monthly payments, which can then be used to help other areas of their budgets.”
Meanwhile, mortgage loans in forbearance increased to 8.16 percent as of May 10. The MBA estimates that 4.1 million homeowners are currently in forbearance plans. Currently, mortgages backed by Ginnie Mae have the largest overall shares of loans in forbearance by investor type (11.26 percent)—a continuing trend.
“The pace of forbearance requests continued to slow in the second week of May, but the share of loans in forbearance increased,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “There has been a pronounced flattening in loans put into forbearance—despite April’s uniformly negative economic data, remarkably high unemployment and it now being past May payment due dates. However, FHA and VA borrowers are more likely to be employed in the sectors hardest hit in this crisis, which is why more than 11 percent of Ginnie Mae loans are currently in forbearance.”
Added Fratantoni, “We will continue to closely monitor the forbearance request and call volume data for any sign of an uptick, but current trends suggest that if the economy continues to gradually reopen, the situation could be stabilizing.”
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