Jumbo Business Leads Rise in Weekly Mortgage Market Index

Jumbo Business Leads Rise in Weekly Mortgage Market Index

DALLAS — (July 30, 2012) New mortgage activity inched higher last week with jumbo loans leading the gain. The boost in jumbo business was fueled by a drop in the spread between jumbo and conforming pricing. Demand for government-insured loans and adjustable-rate mortgages, however, turned lower.

The volume of pricing inquiries pulled by the average originator was up 2 percent from the previous week, putting the U.S. Mortgage Market Index from Mortech Inc. and Mortgage Daily for the week ended July 27 at 241. Compared to a year earlier, business increased 5 percent.

Extremely low mortgage interest rates and the summer moving season for families with school-aged children both likely contributed to the rise in the index this week

“It’s always nice to see a spike in our index as it indicates that borrowers are reaching out to lenders and that demand for home financing is growing,” said Don Kracl, President of Mortech. “However, we must remember that there is a great deal of volatility in the marketplace right now and while borrowers are reaching out for information, without the right handling, these leads will not convert into closed loans. The index indicates that there is opportunity in the market now for lenders. Capitalizing on it will require them to act appropriately as they enter into discussions with these borrowers and move them into the loan origination process”

At the head of the pack were jumbo loan inquiries, which increased 8 percent from the week ended July 20. The share of total activity that was for loans in excess of $417,000 grew to 9.1 percent from 8.6 percent seven days earlier.

Helping to enhance demand for jumbo mortgages was the jumbo-conforming spread, which narrowed to 77 basis points from 85 BPS in the prior report.

Refinances, the next strongest category, increased by 3 percent from the previous week and were up by over half from the week ended July 29, 2011. Refinance share crept up to 75.1 percent from 74.6 percent a week prior and soared from a little more than half in the same week last year. This week’s total share reflected a 62.1 percent rate-term share and a 13.0 percent cashout share.

There was no week-over-week change in purchase activity, though purchase financing has plummeted 46 percent from 52 weeks prior.

Pricing inquiries for loans insured by the Federal Housing Administration fell 6 percent from the last report and were down 15 percent from the same week in 2011. FHA share slipped to 9.9 percent from 10.7 percent and was down from 12.0 percent a year earlier.

The worst-performing category was ARM activity, which fell 8 percent from the last report. ARM business has tumbled 72 percent over the past 12 months. ARM share declined to 2.9 percent from 3.2 percent in the previous week. ARM share was down from 11.0 percent during the same week in the previous year.

Overall pricing inquiries strengthened on new lows for interest rates. The average 30-year fixed-rate mortgage was 3.554 percent in the latest report — the lowest on record since the Mortgage Market Index was launched in 2009. The 30 year was 3.631 percent a week earlier and 4.708 percent a year earlier.

Borrowers who opted for a 15-year loan were quoted rates that were 59 BPS better than 30-year rates. The spread between 15- and 30-year mortgages diminished from 65 BPS in the previous week and 88 BPS a year prior.