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The latest updates from the Mortgage Bankers Association show low interest rates are incentivizing buyers to apply. Mortgage applications are up for the week ending July 3, and as some states return back to some type of normalcy, forbearance rates continue to decline. However, for some, mortgages may not come so easily. In June, mortgage credit availability decreased, signaling that lending standards are tightening.

Here’s the breakdown:

Mortgage Applications

For the week ending July 3, mortgage applications increased 2.2 percent WoW, according to the MBA’s Weekly Mortgage Applications Survey. This week’s results included an adjustment for the Fourth of July holiday.

On an unadjusted basis, the Market Composite Index decreased 0.4 percent WoW. The Refinance Index increased 0.4 percent WoW—111 percent higher YoY. Additionally, the seasonally adjusted Purchase Index increased 5 percent WoW. Unadjusted, that Index decreased 5 percent WoW—33 percent higher than the same time last year.

“Mortgage rates declined to another record low as renewed fears of a coronavirus resurgence offset the impacts from a week of mostly positive economic data, such as June factory orders and payroll employment. The 30-year fixed rate slipped to 3.26 percent—down 53 basis points since late March. Borrowers acted in response to these lower rates, after accounting for the July 4 holiday,” said Joel Kan, MBA’s associate vice president of Economic and Industry Forecasting. “Purchase applications continued their recovery, increasing 5 percent to the highest level in almost a month and 33 percent from a year ago. The average purchase loan size increased to $365,700—also another high—as borrowers contend with limited supply and higher home prices.”

Added Kan, “Refinance applications increased slightly, driven by a 2 percent rise in conventional refinances. Overall refinance activity was up 111 percent from last year.”

Mortgage Forbearance

For the third consecutive week, loans in forbearance decreased by 8 basis points from 8.47 percent to 8.39 percent as of June 28, according to the MBA’s latest Forbearance and Call Volume Survey. In total, there are currently 4.2 million homeowners in forbearance plans currently, the MBA estimates.

The Fannie Mae and Freddie Mac share of loans in forbearance also dropped—the fourth week in a row with a 9-basis-point improvement to 6.17 percent. Ginnie Mae loans in forbearance decreased 11 basis points to 11.72 percent.

“We learned last week that the job market improved more than expected in June. With that as background, it is not surprising that the forbearance numbers continue to improve as more people go back to their jobs,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “The improvement in the forbearance data was broad-based, with declines for both GSE and Ginnie Mae loans. The decrease in new forbearance requests indicates that further declines are likely in the weeks ahead.”

Added Fratantoni, “Looking at the mix of loans that are exiting forbearance, we are seeing a higher share exiting into deferral options and modifications, and somewhat fewer simply opting out of a forbearance plan.”

Credit Availability

According to the MBA’s recent Mortgage Credit Availability Index (MCIA), June saw a decline of 3.3 percent to 125. There seems to be more restrictions happening in the conventional-mortgage space, with the Conventional MCAI decreasing 4.1 percent while the Government CAI decreased only 2.8 percent.

“Mortgage credit supply dropped again in June, as investors further reduced their willingness to purchase jumbo loans and those with lower credit scores. Lenders are navigating a gradual economic and housing market recovery that is still facing headwinds from the ongoing COVID-19 pandemic,” said Kan. “The overall credit availability index decreased 3.3 percent to its lowest level since April 2014, with all of the sub-indexes falling to lows not seen since 2014-2015.”

Added Kan, “Credit supply has fallen over 30 percent since February—before the pandemic—with an 18 percent decrease in government loan availability, and a 57 percent drop in jumbo loan availability.”

Source: Mortgage Bankers Association