Mortgage Bankers Weekly Update: Essentially Unchanged Despite Lowest Rates

Market Composite Index: (loan application volume) increased 0.6 percent on a seaso
nally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.4 percent compared with the previous week.

Refinance Index: increased 0.6 percent from the previous week and the seasonally adjusted Purchase Index increased 0.3 percent from one week earlier.

Purchase Index: decreased 0.3 percent compared with the previous week and was 34.1 percent lower than the same week one year ago.

Refinance Share of Mortgage Activity: increased to 78.1 percent of total applications from 78.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9 percent from 5.4 percent of total applications from the previous week.

Arm Share: increased to 5.9 percent from 5.4 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

Federal Reserve policymakers have been increasingly clear that they will keep their target rate at exceptionally low levels for an extended perio d. They have also made no moves to this point in terms of asset sales from their trillion dollar portfolio of mortgage backed securities. Fannie Mae and Freddie Macs large buyouts of delinquent loans from MBS have substantially been completed by this point, so there are no longer large-scale purchases of MBS by unconventional buyers artificially constraining mortgage rates. However, continued financial turmoil appears to have led many investors, including international buyers, to favor MBS, and new issuance remains quite low.

We predict that mortgage originations will fall to $1.48 trillion in 2010 from an estimated $2.1 trillion in 2009. Purchase originations will decrease 7 percent to $686 billion, as home prices continue to fall and the boost from the homebuyer tax credits wane. Refinance originations will fall by about 42 percent to $797 billion in 2010. We continue to mark up our refinance origination forecast given that mortgage rates have continued to remain close to historical lows.

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