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ARMs, Jumbos Defy Weekly Decline in Refinances

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As rates inched up again, refinances slowed and a bigger share of prospective borrowers opted to lock in on an adjustable-rate mortgage. Also offsetting the weekly downturn in refinances was jumbo activity.

Overall mortgage business was off less than a percent from last week, leaving the U.S. Mortgage Market Index from Optimal Blue and Mortgage Daily for the week ended Feb. 1 at 169. Compared to the revised index the same week last year, business was down 14 percent.

The week’s best performance was turned in by the ARM category, with ARM rate locks jumping by more than half from the week ended Jan. 25. But compared to the same week in 2012, ARM business was down by more than half. ARM share climbed to 4.8 percent from last week’s 3.2 percent but fell from 5.6 percent a the same point last year.

Rate locks for jumbo mortgages grew 23 percent from the previous report and were 9 percent higher than the week ended Feb. 3, 2012. Jumbo share widened to 9.6 percent from 7.8 percent a week earlier and 6.1 percent a year earlier. The stronger activity among jumbo borrowers came as the premium for a larger loan was trimmed to 25 basis points from 26 percent the prior week. The jumbo-conforming spread was way down from 51 BPS one year prior.

Purchase financing activity increased 8 percent for the week and was 3 percent better on a year-over-year basis.

Rate locks for loans insured by the Federal Housing Administration were off less than a percent from the previous report but have fallen 10 percent from the year-earlier period. FHA share was unchanged from a week earlier at 19 percent but edged up from 18 percent a year earlier.

Refinances felt the biggest hit this past week, with rate locks dropping 9 percent. Refinance have retreated by more than a quarter from the same week in 2012.

Refinance share declined to 46.6 percent from 50.8 percent and was 58.8 percent a year ago. This week’s share reflected a rate-term proportion of 36.3 percent and a cashout share of 10.3 percent.

Mortgage activity moved lower in response to rising rates, with the 3.859 percent 30-year mortgage rate increasing for the second consecutive week and averaging 12 BPS more than in the previous report. But fixed rates have dropped from a year prior, when the 30 year averaged 4.108 percent.

The benefit of a shorter term improved this week, with 15-year mortgages being locked at a 77-basis-point discount to 30-year loans. The spread was 74 BPS a week prior and 73 BPS a year prior.

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