Mortgage Applications Overall Surge, But FHA-Backed Loans Sink

Mortgage Applications Overall Surge, But FHA-Backed Loans SinkMortgage activity increased 4.5 percent last week from one week earlier on the strengthen of refinances — and despite a 14 percent drop in government-backed purchase applications, according to the Mortgage Bankers Association.
The MBA’s Composite Index, a measure of overall mortgage application volume, increased 4.5 percent on a seasonally-adjusted basis from one week earlier.
Its refinance component increased 6 percent from the previous week.
However, government purchase applications fell by almost 14 percent following the April 1 increase in FHA (Federal Housing Administration) mortgage insurance premiums.
The FHA raised raise by 10 basis points, or 0.1 percent, the annual insurance premium paid by borrowers on new FHA loans. The increase is expected to add $13 per month for the average borrower and will strengthen FHA’s capital reserves without limiting access to credit for qualified borrowers, U.S. housing officials have said.
“Although total purchase application volume fell last week, there was a significant divergence between the conventional and government markets,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Following the April 1 increase in FHA mortgage insurance premiums, government purchase applications fell by almost 14 percent, to their lowest level since February 2013.”
In contrast, applications for conventional purchase loans increased by more than 5 percent, bringing the conventional purchase index to its highest level since October 2009 — and the highest level since the expiration of the homebuyer tax credit.
With these changes, the government share of all purchase loans fell to 30 percent, the lowest level since the MBA began tracking such activity in 2011.
The refinance share of mortgage activity increased to 75 percent of total applications from 74 percent the previous week.
The adjustable-rate mortgage (ARM) share of activity decreased to 5 percent of total applications.
The HARP (Home Affordable Refinance Program) share of refinance applications increased from 28 percent last week to 30 percent this week. HARP has helped 2.2 million borrowers — many of them deeply “underwater” in their loan-to-values — refinance into historically low mortgage rates.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.68 percent, the lowest rate since January 2013, from 3.76 percent, for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 3.79 percent, the lowest rate since January 2013, from 3.85 percent, for 80 percent LTV loans.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.43 percent, the lowest rate since January 2013, from 3.48 percent, for 80 percent LTV loans.

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