Mortgage rates continued to reach new record-low levels in the past week, spurring more origination applications, while the share of mortgages in forbearance continued to decrease.
Both the Mortgage Bankers Association (MBA) and Freddie Mac announced new survey lows for 30-year fixed-rate mortgages in the past week.
MBA’s survey had rates falling to 3.19 percent from 3.26 percent a week earlier, while Freddie Mac’s reported rates at 3.03 percent, down from 3.07 percent a week earlier.
“The summer is heating up as record-low mortgage rates continue to spur homebuyer demand,” Freddie Mac Chief Economist Sam Khater said in a release. “However, it remains to be seen whether the demand will continue if COVID cases rise to the point that it hinders economic growth.”
A year ago at this time, Freddie Mac reported 30-year rates at 3.75 percent.
The moves pushed mortgage applications ahead of 2019 levels again for the week ending July 10. MBA reported that purchase applications were 16 percent above the same week a year earlier, the eighth week in a row of year-over-year growth, while refinance applications were 107 percent higher year-over-year.
“The drop in rates led to a jump in refinance activity to the highest level in a month, with refinance loan balances also climbing to a high last seen in March,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press release. “Purchase activity remains relatively strong, despite the continued economic uncertainty and high unemployment caused by the ongoing pandemic.”
Meanwhile, the number of loans currently in forbearance dropped in the latest week, according to MBA and Black Knight.
MBA’s latest survey found that 4.1 million homeowners are in forbearance as of July 5, a total of 8.18 percent of all active mortgages.
That total included 10.56 percent of Ginnie Mae-backed mortgages, 6.07 percent of those backed by Fannie Mae or Freddie Mac and 10.93 percent of portfolio and private label-backed mortgages.
“The share of loans in forbearance continues to decrease, as more workers are brought back from temporary layoffs. However, our survey reveals a notable shift in the location of many FHA and VA loans, which have been bought out of Ginnie Mae pools – predominantly by bank servicers – and moved onto bank balance sheets,” MBA Senior Vice President and Chief Economist Mike Fratantoni said in a release. “As a result, there was a sharp drop in the share of Ginnie Mae loans in forbearance, and an offsetting increase in the share of portfolio loans in forbearance. These buyouts enable servicers to stop advancing principal and interest payments, and to work with borrowers in the hope that they can begin paying again before they are re-securitized into Ginnie Mae pools.
“Forty-three percent of loans in forbearance are now in an extension following their initial forbearance term, while more than 10 percent of borrowers entered into a deferral plan to exit forbearance – down from 16 percent the week prior. For those exiting forbearance over the next several months, we expect to see many of the borrowers with GSE loans to utilize the deferral option.”
Black Knight reported that 4.14 million homeowners were in forbearance plans, the lowest active number since April 28. Black Knight said that’s 7.8 percent of all active mortgages, representing just less than $900 billion in unpaid principal.
That total includes 11.6 percent of Ginnie Mae-backed loans, 6 percent of loans backed by Fannie Mae or Freddie Mac, and 8.2 percent of private label or portfolio loans.
“This latest decline in the number of homeowners in active forbearance is an encouraging sign of continued improvement,” said Andy Walden, economist and director of market research for Black Knight, in a release. “The reduction of roughly 435,000 – the largest single-week drop yet – was driven at least in part by the fact that more than half of all active forbearance plans entering the month were set to expire at the end of June. While the majority of those have been extended, this week’s data suggests a significant share were not.”