Mortgage Bankers Weekly Update: Mortgage Applications Decrease as Rates Jump

Mortgage Bankers Association for the week of 02/09/2010

Market Composite Index: (loan application volume) a measure of mortgage loan application volume, decreased 5.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3.9 percent compared with the previous week.

Refinance Index: decreased 7.7 percent from the previous week

Purchase Index: decreased 1.4 percent from one week earlier. The unadjusted Purchase Index increased 4.8 percent compared with the previous week and was 16.6 percent lower than the same week one year ago.

Refinance Share of Mortgage Activity: decreased to 66.6 percent of total applications from 69.3 percent the previous week. This is the lowest refinance share observed in the survey since the beginning of May 2010.

Arm Share: increased to 5.9 percent from 5.5 percent of total applications from the previous week.

MBA outlook: (Excerpted from

Mortgage rates increased last week as many incoming economic indicators continue to show stronger growth than had been anticipated. Refinance volume continues to be low, as fewer homeowners with equity have any incentive to refinance, said Michael Fratantoni, MBAs Vice President of Research and Economics. We are at the beginning of the spring buying season, but purchase volume remains weak on a seasonally adjusted basis

We expect that mortgage originations will decrease to $967 billion in 2011, the lowest level of originations since 1997. This is a decline from $1.5 trillion in 2010 and a little under $2.0 trillion in 2009. Purchase originations should increase to $615 billion in 2011 up from $473 billion in 2010. Refinance originations, primarily impacted by the level of mortgage rates, are expected to drop sharply in 2011 to $352 billion and fall further in 2012 to $237 billion. We expect that the refinance share of originations should fall from 69 percent in 2010 to 36 percent in 2011, and then 24 percent in 2012 as rates climb above the 6 percent mark.

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