Mortgage Applications Fall Even as Rates Dip

Andrew Cummings
February 17, 2017

The refinance share of mortgage activity has decreased to its lowest level since June 2009 at 46.9% of all applications, down from 47.9% the previous week.

The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.28 percent, down two basis points from the previous quarter and down eight basis points from a year earlier; the fourth quarter saw the lowest rate of new foreclosures started since the fourth quarter of 1988.

Loan applications for new home purchases increased 9.2% year over year in January, according to the Mortgage Bankers Association.

The Refinance Index decreased by 3% over the same period. Compounding the effect of higher interest rates, a change in Veterans Administration rules made it harder for borrowers to refinance. The VA share decreased to 11.8% from 12.7%. "On Feb. 1, Ginnie Mae implemented new criteria regarding the inclusion of VA-streamlined refinances in certain mortgage-backed-security pools, and this likely led to a decrease in streamlined refinances last week".

The serious delinquency rate (loans that are 90 days or more past due or in the process of foreclosure) was 3.13%, an increase of 17 basis points compared with the third quarter but a decrease of 31 basis points compared with the fourth quarter of 2015.

Mortgage rates moved slightly higher in the first few days of this week, especially after Federal Reserve Chair Janet Yellen suggested a rate hike could come sooner than later. It is now 3% higher than it was the same week one year ago.

Current market fundamentals are expected to buoy demand for new homes in the year ahead.

"The mortgage delinquency rate has declined for several quarters, and we are observing a stabilization of delinquency rates", Joe Mellman, vice president and mortgage business leader for TransUnion, said in a news release.

Yet the average 30-year mortgage rate dipped to 4.32% from 4.35%.

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