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It’s a mixed bag when it comes to mortgages in today’s economic climate. While forbearance rates continue to drop, giving the industry a glimmer of hope amidst the economic uncertainty, mortgage applications are also decreasing.

Here’s the breakdown:

Mortgage Applications
According to the MBA’s Weekly Mortgage Applications Survey for the week ending June 19, applications decreased 8.7 percent from the previous week.

The Market Composite Index, a measure of mortgage loan application volume, decreased 8.7 percent on a seasonally adjusted basis from the previous week. On an unadjusted basis, the Index decreased 9 percent from the previous week. Additionally, the Refinance Index decreased 12 percent from the previous week—76 percent higher YoY. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier, and the unadjusted Purchase Index decreased 4 percent from the previous week; it was 18 percent higher YoY.

“Mortgage applications decreased 9 percent last week, with both refinance and purchase activity falling despite the 30-year fixed rate mortgage staying at 3.30 percent—the record low in MBA’s survey,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinance applications dropped to their lowest level in three weeks, but the index remained 76 percent higher than a year ago. Despite the decline last week, MBA still anticipates refinance originations to increase to $1.35 trillion in 2020—the highest level since 2012.”

Added Kan, “Even with high unemployment and economic uncertainty, the purchase market is strong. Activity has climbed above year-ago levels for five straight weeks and was 18 percent higher than a year ago last week. One factor that may potentially crimp growth in the months ahead is that the release of pent-up demand from earlier this spring is clashing with the tight supply of new and existing homes on the market. Additional housing inventory is needed to give buyers more options and to keep home prices from rising too fast.”

Mortgage Forbearance
Forbearance rates decreased for the week ending June 14, according to the latest Forbearance and Call Volume Survey. For the first time since the survey’s inception in March, forbearance rates decreased from 8.55 percent to 8.48 percent. According to the MBA, 4.2 million homeowners currently have mortgages in forbearance plans—down from almost 4.3 million the previous week.

Fannie Mae and Freddie Mac loans in forbearance decreased for the second consecutive week to 6.31 percent—a 7-basis-point improvement. In addition, Ginnie Mae loans held steady for the third week at 11.83 percent. Portfolio loans and private-level securities dropped to 9.99 percent.

“The lower share of loans in forbearance was led by declines in GSE and portfolio and PLS loans, as more of those borrowers exited than entered a new forbearance plan,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Fewer homeowners in forbearance underscores the continued improvements in the job market, and provides another sign of the fundamental health of the housing market, which has rebounded considerably over the past several weeks.”

Added Fratantoni, “The big unknown with respect to this positive development is the extent to which it relies upon policy measures put in place to help families through this crisis, particularly the stimulus payments and enhanced unemployment insurance benefits that were key parts of the CARES Act. We expect to see further improvements in the weeks ahead given the drop in forbearance requests this week.”

Source: Mortgage Bankers Association