Mortgage Applications Drop After Four Weeks of Gains

The Mortgage Bankers Association's Market Composite Index ended a streak of four consecutive weeks of gains as it fell by 12.2% on a seasonally adjusted basis for the week ended June 4, 2010. On an unadjusted basis, the Index decreased 21.1% from the previous week. The most recent results were adjusted for the Memorial Day holiday. The Refinance Index ended its streak of gains as it fell by 14.3% from the previous week while the seasonally adjusted Purchase Index decreased 5.7%. "Purchase applications are now 35% below their level of four weeks ago, as homebuyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April," said Michael Fratantoni, MBA's VP of Research and Economics. Pointing out that refi applications fell even though rates were flat compared with the previous week, Fratantoni added that "many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance." The market share of refi applications decreased to 72.2% of total applications from 73.8% the previous week, while the share of adjustable-rate mortgage applications fell from 5.2% to 5.1%. The average contract interest rate for a 30-year fixed rate mortgage decreased by 2 basis points to 4.81% from 4.83% for the most recent week with points decreasing from 1.05 to 1.02 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs increased by 2 bps during the week to 4.26%. The average contract interest rate for one-year ARMs declined 2 bps from the previous week, to 6.94%.