The Mortgage Bankers Association (MBA) reported this morning that application activity was mixed for the week ending Sept. 12.
On a seasonally adjusted basis, the Refinancing Index declined 15% to 2438.5, from last week’s showing of 2883.6. In contrast, the Purchase Index increased 5.8% to 432.4, from last week’s figure of 408.8. However, on an unadjusted basis, both the Refi and Purchase indexes rose, increasing nearly 6% and 30%, respectively.
Analysts said that it is somewhat surprising that the Refinancing Index decreased when rates have been coming down.
“I find it a little surprising; I actually thought the Refi Index would get to a number around 3000,” said Art Frank, head of mortgage research at Nomura Securities International. He added that there was a steady fall in rates from the peak on Sept. 2 to the bottom of secondary market rates on Sept 12. Rates came down exactly 50 basis points over this time period, from a FNMA current coupon yield of 5.81 down to 5.31. With the FNMA current coupon yield staying in the 5.30 range, Frank expects the Refi Index to move back up to the high 2000s in the next week.
Frank said that there is still quite a few borrowers with 6.5s mortgages and a considerable amount of 6s outstanding. He added that borrowers in these coupons who were not able to refinance in the past are seeing the current environment as a fresh opportunity. Borrowers with 6.50% and 6.58% mortgages who want to take out equity now have about 50 basis point of refinancing incentive. Frank stated that there is $62 billion FNMA 6.5s outstanding and $117 billion Gold 6.5s outstanding, totaling $279 billion in 30-year FNMA/Gold 6.5s outstanding.
In term of this week's mortgage rates, Countrywide Securities expects the 30-year fixed mortgage rate reported by the Freddie Mac mortgage rate survey to be at 6.05% from, down from 6.16% the previous week.