Mortgage Market Index Falls as Jumbo Leads Holiday Decline

DALLAS — (Dec. 26, 2012) As the mortgage industry prepared to celebrate the holidays, new business declined. Jumbo activity took the biggest hit, though refinances weren’t far behind. Mortgage rates, meanwhile, moved higher.

The U.S. Mortgage Market Index from Optimal Blue and Mortgage Daily for the week ended Dec. 21 was 169. The index, which reflects the average number of rate locks per Optimal Blue user, descended from the previous week, when it came in at 192.

Compared to a year earlier, when the index was calculated based on pricing inquiries from another data source, business was down 12 percent.

Leading the latest decline were jumbo locks, which tumbled 21 percent from the week ended Dec. 14. Jumbo share fell to 7.9 percent from 8.8 percent.

Jumbo borrowers paid a 34-basis-point premium over conforming borrowers, improving from a jumbo-conforming spread of 38 BPS in the previous report.

Refinances took a 15 percent hit compared to the previous week and were down a third from the week ended Dec. 23, 2011 — though the year-earlier comparison is distorted because of the change in the data source. Refinance share diminished, falling to 52 percent from 54 percent a week earlier and 68 percent from a year earlier using the old data. Reflected in the most recent share was a 41 percent cashout share and an 11 percent cashout share.

Originators locked 14 percent fewer adjustable-rate mortgages than they did in the prior week. ARM activity was off 40 percent from the same week last year.

ARMs accounted for 3.5 percent of rate locks, slipping from 3.6 percent in the previous report.

Conventional business fell 13 percent for the week and was off 21 percent over the prior 12 months.

Next were purchase rate locks, which fell 8 percent for the week. While purchase activity was up nearly a third from a year earlier using data from the prior source, the increase is more reflective of using rate locks versus pricing inquires as the base metric than an actual year-over-year increase in purchase business.

Rate locks on mortgages insured by the Federal Housing Administration were 5 percent lower than the prior week, making FHA the best-performing category in the current report. FHA activity has increased 56 percent over the past year.

FHA share was 19 percent, up from 18 percent the previous week and 11 percent in the same week during the previous year.