Analysts: Index Shows MBS Buys' Benefits Almost Gone

A report from analysts at Keefe, Bruyette and Woods said the decline in this week's refinance component of the Mortgage Bankers Association Market Composite Index suggests that any benefit from the Federal Reserve's agency mortgage-backed securities purchase program has largely dissipated. The MCI, an overall measure of mortgage applications, was 444.8, a decrease of 18.9% on a seasonally adjusted basis for the week ending June 26, 2009, when compared with 548.2 one week earlier. The refinance index decreased 30.0% to 1482.2 from 2116.3 the previous week. KBW analysts Bose George and Jade Rahmani pointed out the refi index is now near the level it was at the time the Fed announced the program at the end of November. They also pointed out the overall index is at its 2009 low and down 80% from its highest point for the year. The seasonally adjusted Purchase Index decreased 4.5% to 267.7 from 280.3 one week earlier. On an unadjusted basis, the index decreased 18.5% compared with the previous week and decreased 7.4% compared with the same week one year earlier. There was a decline in the share of refi applications to 46.4%, down from 54.0% the previous week, while the share of adjustable-rate mortgages applications increased to 4.3% from 4.1% for the previous week, the MBA said. There was a decrease in the average contract interest rate for 30-year fixed-rate mortgages to 5.34% from 5.44%, with points (including the origination fee) increasing to 1.12 from 0.99 for loans with 80% loan-to-value ratios, the association said. The MBA can be found online at http://www.mortgagebankers.org.