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FHA Business Leads Drop in Mortgage Activity

An improvement in interest rates was overcome by the holiday effect, and new mortgage business slowed. Government-insured activity tumbled the most.

A 9 percent decline from seven days earlier left the U.S. Mortgage Market Index from LoanSifter/Optimal Blue and Mortgage Daily for the week ended Aug. 29 at 157.

Activity was also down from the same week in 2013, with LoanSifter users pulling an average of 17 percent fewer inquiries in the latest report versus a year earlier.

An 11 percent decline from the week ended Aug. 22 hit inquiries for mortgages insured by the Federal Housing Administration. FHA business has retreated 20 percent compared to the same week last year.

FHA share fell to 15.5 percent from 15.9 percent in the previous report and 16.1 percent in the year-earlier report.

A nearly 9 percent decline hit purchase financing inquiries, while a 19 percent decline was recorded compared to the week ended Aug. 30, 2013.

Refinance business was off more than 8 percent for the week and 15 percent from one year prior.

Refinance share inched up just past 49.0 percent from just under 49.0 percent in the previous report. It was slightly wider than 47.9 percent in the year-earlier report. The newest refinance share was comprised of a 33.1 percent rate-term share and a 15.9 percent cashout share.

Inquiries for conventional mortgages dropped 7 percent and have diminished by nearly a quarter on a year-over-year basis.

Jumbo activity slid 5 percent but remained 26 percent stronger than in the same week last year. Jumbo share climbed to 11.2 percent from 10.7 percent and was significantly wider than 7.4 percent 12 months prior.

Jumbo rates were 5 basis points better than conforming rates, swinging from a positive 2-basis-point spread in the previous report and a positive 26-basis-point spread in the year-earlier report.

The smallest loss for the week was with inquiries for adjustable-rate mortgages, which were 4 percent fewer than in the previous report and in the year-previous report.

Conforming 30-year fixed rates averaged 4.474 percent, slipping 2 BPS from seven days earlier and 29 BPS better than 12 months earlier.

Fifteen-year mortgages were priced 96 BPS lower than 30-year loans, the same spread as in the previous week’s report. The spread was 94 BPS one year prior.

Mortgage rates aren’t likely to be much different in the next Mortgage Market Index report based on the week’s Treasury market activity.

During the period represented in the report, the 10-year Treasury yield averaged 2.37 percent, based on data reported by the Treasury Department. The 10-year yield closed at 2.35 percent Friday.

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