Ending a three-week trend of declines, mortgage loan application volume surged 14.6 percent on a seasonally-adjusted basis for the week ending February 26, 2010, the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm reported Wednesday.[IMAGE]
According to MBA's Weekly Mortgage Applications Survey, the Refinance Index skyrocketed 17.2 percent from the previous week, and the seasonally-adjusted Purchase Index jumped 9 percent during the same period. In addition, the refinance share of mortgage activity increased to 69.1 percent of total applications, up from 68.1 percent the week prior.
The four week moving average for the seasonally-adjusted Market Index was up 0.4 percent, and the Refinance Index average jumped 1.8 percent. However, this average was down 2.7 percent for the seasonally-adjusted Purchase Index.
""Mortgage applications rebounded last week, particularly refis, as rates dropped back below 5 percent,"" said Michael Fratantoni, MBA's VP of research and economics. ""Purchase activity remains subdued, with application volumes remaining within the narrow range seen in the last few months.""
The week-to-week drop in mortgage rates was the driving factor behind the increase in mortgage applications last week. MBA said the average contract interest rate for 30-year fixed-rate mortgages fell to 4.95 percent from 5.03 percent, and the average rate for 15-year fixed-rate mortgages inched down to 4.27 percent from 4.35 percent.
Although mortgage rates have dropped to near half-century lows, millions of U.S. homeowners haven't benefitted from the decline in rates because they can't--or won't--refinance, ""the Wall Street Journal recently reported."":http://online.wsj.com/article/SB20001424052748704358004575096020101445724.html
According to investment bank ""Credit Suisse"":https://www.credit-suisse.com/global/en/, borrowers with 30-year conforming fixed-rate mortgages collectively hold about $1.2 trillion of home loans, and around 37 percent of these borrowers have mortgage rates of 6 percent or higher. With 30-year rates hovering around 5 percent, Credit Suisse says many of these borrowers could reduce their rates by a full percentage point if they refinanced.
The Wall Street Journal cited a report by ""First American CoreLogic"":http://www.facorelogic.com/, which found that loans refinanced in 2009 will result in $3.4 billion in savings for consumers this year, which will return an additional $17.2 billion in savings to borrowers over the next five years.
However, borrowers who are refinancing aren't those who need it the most. The Wall Street Journal cited Fratantoni, who said savings from refinancing have, on the whole, gone to ""very, very good credit borrowers and it really isn't going very far down the spectrum.""
Why is refinance activity so low for borrowers who actually need it? The Wall Street Journal said about a quarter of all mortgage holders owe more on their house than it is worth, which can make it nearly impossible to secure refinancing. In addition, falling home values have hindered many buyers from refinancing, because according to the Wall Street Journal, borrowers with less 20 percent equity may have to pay for mortgage insurance.
Refinance help is available, though. ""As DSNews.com reported"":http://www.dsnews.com/articles/administrations-refinance-program-gets-one-year-extension-2010-03-01, the Federal Housing Finance Agency announced Monday that it is extending the Home Affordable Refinance Program through June 30, 2011. The program, which was introduced in February 2009, provides mortgage refinancing to borrowers who are underwater on their mortgages. Many industry groups pushed for the extension of this program, saying it will Ã¢â‚¬Å“keep creditworthy, performing borrowers in their homes and out of unnecessary foreclosure.""