Questions? Feedback? powered by Olark live chat software

Chrisman's Corner: Who Cares about Loan Application Volumes

Every Wednesday morning at 7AM EST the Mortgage Bankers Association (MBA) announces the results from its weekly mortgage applications survey. Last Wednesday, for the week ending July 25, mortgage applications decreased 2.2 percent from one week earlier. The “Refinance Index” decreased 4 percent from the previous week, and the seasonally adjusted “Purchase Index” increased 0.2 percent from one week earlier. Does it matter, and who cares?

Quite a few parties follow the MBA’s application numbers, including your team at JMAC. Lenders are interested in them as a way of checking their application volume versus that of the industry. (The MBA tells us that its numbers include 75% of originations.) Investors who buy loans from lenders follow the numbers to give them an indication of the future supply of loans and securities backed by those mortgages.

The numbers last week indicated that the refinance share of mortgage activity decreased to 53.2 percent of total applications. A rise or drop in rates directly impact the refinance business as more people tend to refinance in an environment where rates are dropping. We see the same thing at JMAC as do our brokers.

The MBA also told us that the adjustable-rate mortgage (ARM) share of activity remained unchanged at 8 percent of total applications. We are not in an ARM market – yet – since 30-year rates are still in the low 4% area. Once again, investors, and the industry, are interested in ARM trends since if borrowers show and increased interest in loans that are adjustable then appetites for those loans must adjust to the supply. The numbers that the MBA produces every Wednesday morning also include average conforming, FHA, ARM, and jumbo rates, points charged, and loan-to-values, and how those numbers changed from the week before.

So the numbers give JMAC and others a valuable look at trends in residential lending that are only one week old. And since applications are the start of the origination process, they give investors an idea of what to expect a month or two down the road.