Mortgage rates recorded further easing in the week ending Jan. 28, according to Freddie Mac.

Specifically, the 30-year fixed mortgage rate averaged 4.98% with an average 0.6 point compared to 4.99% with an average 0.7 point last week.  This provides around a four-basis-point improvement in the no-point rate to ~5.13%. 

After a near term peak of 5.14% for the week ending Dec. 31, mortgage rates have steadily declined over the past four weeks by 16bps to their lowest level since mid-December.  Despite the improvement, refinancing response is expected to stay muted. 

Yesterday, the Mortgage Bankers Association (MBA) reported that for the week ending Jan. 22 with mortgage rates at 4.99% the Refinance Index declined 15%. 

Michael Fratantoni, vice president of research and economics at the MBA, said that, "although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates." Most analysts believe mortgage rates need to fall below 4.50% to spark a refinance wave.  

For January, 30-year fixed mortgage rates averaged 5.03%, 10 basis points higher than December's average.

The higher rates have led to reduced refinancing activity with the Refinance Index averaging 7.9% below December's average through the first three weeks of January. 

As a result, speeds are currently projected to slow further in February (reported in March) by around 15% on 30-year FNMAs in aggregate.    

Freddie Mac also reported a one basis point dip in 15-year fixed mortgage rates to 4.39%, a two basis point decline in 5/1 hybrid ARMs to 4.25%, while one-year ARMs averaged 4.29% compared to 4.32% previously.

While mortgage rates are historically attractive, the foreclosure outlook is extremely worrisome, as the impact of job losses is becoming an increasing reason for the filings. RealtyTrac released its yearend Metropolitan Foreclosure Market Report late yesterday.

Of the top 20 metro areas, California accounted for nine of them, Florida eight, Nevada two and Arizona one. 

While that was not surprising, what is of concern are comments from CEO James Saccacio that, "there is evidence that we're entering a new wave of foreclosures, driven more by unemployment and economic hardship than what we've seen over the past few years" as foreclosure activity is increasing into areas that had been previously more insulated from foreclosures caused by the non-traditional and subprime "affordability" loans.

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