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Jumbo Activity Tumbles as FHA, Purchases Rise

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Led by a decline in new jumbo business, overall mortgage activity slumped this week. But inquiries for purchase financing, government-insured loans and adjustable-rate mortgages strengthened. Rates edged up but might edge back down in the next report.

At 223, the U.S. Mortgage Market Index from Mortech Inc. and Mortgage Daily for the week ended Oct. 26 slipped 1 percent from the prior week. The index was down 13 percent from the same week in 2011.

The week’s biggest loser was the jumbo category, with jumbo pricing inquiries falling 6 percent from the week ended Oct. 19. Jumbo share was 7.8 percent, lower than last week’s 8.2 percent.

The decline in jumbo business came despite that the premium for a jumbo loan was trimmed to 67 basis points from last week’s jumbo-conforming spread of 68 BPS. The spread was just 60 BPS a year earlier.

Refinances saw the next-biggest decline, falling 3 percent from the prior report but 2 percent better than the week ended Oct. 28, 2011.

Three-quarters of this week’s activity was refinance, off slightly from 76 percent in the previous report. Refinance share was just 64 percent a year ago. The most-recent share consisted of a 60 percent rate-term share and a 14 percent cashout share.

Conventional lending was the only other category to see a decline, falling 2 percent for the week and down 12 percent over the past 12 months.

Inquiries for mortgages to finance home purchases climbed 3 percent, though purchase activity has tumbled 39 percent from the same week last year.

Also up 3 percent from seven days earlier was adjustable-rate business. ARM activity stands at 63 percent below a year ago. ARM share edged up to 2.5 percent from 2.4 percent but was less than half the 5.9 percent ARM share a year earlier.

The best performance was put in by loans insured by the Federal Housing Administration, with FHA inquiries up a little more than 3 percent. But FHA business was off 18 percent from the year-earlier period.

FHA share rose to 10.3 percent from the prior week’s 9.9 percent. During the same week last year, FHA share was 11 percent.

Behind this week’s slowdown were rising mortgage rates. Fixed-rate, 30-year, conforming mortgages averaged 3.572 percent, higher than 3.500 percent in the previous report. The 30 year was 4.345 percent a year prior.

The spread between 15- and 30-year mortgages was 70 BPS, making 15-year loans more attractive than a week earlier and a year earlier, when the spread was 68 BPS.

Interest rates might be a little lower in next week’s report based on this week’s Treasury market activity. The yield on the 10-year Treasury note averaged 1.81 percent during the week encompassed by the latest Mortgage Market Index report, while the 10-year yield fell to 1.78 percent Friday, according to the Department of the Treasury.

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