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Refinance Business Explodes

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Following the holiday week, refinance activity leapt to the highest level since early February. All categories of lending strengthened, including purchase transactions. The powerful performance was fueled by record-low mortgage rates — though rates are likely to be higher in the next report.

Prospective borrowers were out in force this week, pushing the number of loan inquiries per loan originator up by more than a third from last week and leaving the U.S. Mortgage Market Index from Mortech Inc. and Mortgage Daily for the week ended June 8 at 267. Business was 10 percent better than the week ended June 10, 2011.

Behind the stellar performance were refinances, with refinance pricing inquiries rising 41 percent from the prior report. Refinance activity, which hasn’t been this lofty since the first week of February, was up by nearly half from the same week last year.

Nearly three quarters of this week’s inquiries were for a refinance transaction. Refinance share increased from 70 percent a week earlier and was just 54 percent a year earlier. This week’s refinance share reflected a 61 percent rate-term share and a 13 percent cashout share.

Also reacting strongly to the low rates were inquiries for mortgages insured by the Federal Housing Administration, which grew by 37 percent. But FHA business was 5 percent lower than a year ago. FHA share inched up to 10.4 percent from the previous week’s 10.1 percent but was weaker than 11.8 percent this week in 2011.

Conventional business increased a third and was 12 percent better than 12 months prior.

A 27 percent gain was reported for both adjustable-rate mortgages and jumbo mortgages. ARM share, however, inched down to 3.9 percent from 4.0 percent, while jumbo share fell to 8.9 percent from 9.3 percent. The premium for a jumbo mortgage climbed to 65 basis points from 61 BPS last week and 52 BPS this week last year.

Inquiries for purchase financing, which had been down each of the prior four weeks, were 18 percent higher in the latest report. But purchase activity still lags the year-earlier period by 37 percent.

Fifteen-year loans were priced at a 67-basis-point discount to 30-year loans, not as good as the 73-basis-point spread in the previous report. The discount was 83 BPS this week last year.

At 3.795 percent, the 30-year fixed-rate mortgage was the lowest on record since the Mortgage Market Index was launched in 2009. The 30 year was 3.841 percent in the previous report and 4.645 percent a year ago.

Mortgage rates are poised to rise around 7 BPS by the time the next Mortgage Market Index report rolls around. Data from the Department of the Treasury indicate that the 10-year Treasury note yield averaged 1.58 percent during the week covered by the latest index, while the 10-year yield closed Friday at 1.65 percent.

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