Dive, Dive, Dive

Applications tumble while rates edge down
By SAM GARCIA
1/4/2002

Mortgage loan applications fell forty percent from the prior week, according to the Weekly Mortgage Applications Survey by the Mortgage Bankers Association of America (MBA). MBA says its survey of mortgage bankers, commercial banks and thrifts covers approximately 40% of all U.S. retail residential mortgage originations.

While refinance applications had experienced the biggest decreases in recent weeks, MBA reported that purchase applications this holiday week were down almost 41% -- a bigger decrease than refinance applications. Last week, MBA reported that purchase applications had reached record levels.

The chief economist for government sponsored housing enterprise Freddie Mac, Frank Nothaft, said that mortgage lending volumes for purchase in 2002 "will be about the same as in 2001, but refinancing volume will decline from last year's fast pace."

The average 30-year fixed rate mortgage (FRM) was 7.14%, falling two basis points (BPS) from last week, according to Freddie Mac's weekly Primary Mortgage Market Survey of 125 thrifts, commercial banks and mortgage lending companies. Freddie reported that the average 15-year FRM fell 3 BPS to 6.62 percent. The spread between the 15-year and 30-year FRM stands at 52 BPS, slightly higher than the 51 BPS from last week.

Freddie said that the average 1-year adjustable rate mortgage (ARM) was up one BPS from last week to 5.26 percent. MBA reported that ARM applications represented 13.5% of total applications, up slightly from last week.

Earlier this week, the Federal Home Loan Bank of San Francisco announced that the monthly weighted average 11th District Cost Of Funds Index (COFI) was 3.368%, tumbling 26 BPS from the prior month to its lowest point in decades.

Bankrate.com reported that 46% of its "mortgage experts" believe rates will fall more than two BPS during the next 30-45 days, while 38% believe rates won't change and 16% think they will rise. "Rates are poised to pull back this week, but this is not the start of a sustainable trend," said Greg McBride, Bankrate.com's financial analyst. "In fact, it may be rather short-lived. Opportunity knocks for those borrowers waiting to lock."

Freddie's chief economist said mortgage rates are expected to stay near their current low levels in 2002.

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