Demand for New Loans Are Up!

Demand for New Loans Up as Rates Hold Below 5%

Oct 8th, 2009

Mortgage rates held below 5 percent for the third consecutive week helping refinance and purchase loan demand increase, according to a weekly report released by the Mortgage Bankers Association yesterday morning. The MBA said, in the week ending October 2, 2009, the average mortgage rate for 30-year fixed rate loan fell to 4.89 percent from 4.94 percent (avg points of .70) in the previous week. That in combination with the soon to expire $8,000 tax credit for first time home buyers helped mortgage application volume increase by 16.4 percent.

The refinance index increased 18.2 percent from the previous week to the highest level seen since May while the purchase index rose 13.2 percent from one week earlier, putting the index at its highest level since January.

Of particular note, the government purchase index is at a record level after a 14.4 percent increase from the week before.

Last week the FHFA (Federal Housing Finance Agency) reported on the delinquencies in Fannie Mae and Freddie Mac's portfolios. In that report they stated the following regarding their portfolios:

"The number of delinquent first-lien residential mortgages with credit score at origination of 660 or higher increased, while mortgages with less than 660 credit score at origination decreased. The increase in the number of loans with 660 or higher credit score and decrease in loans with less than 660 credit score at origination reflect actions taken by both Enterprises to increase the credit quality of new business and continues a trend seen over the past year."

This further illustrates that borrowers with higher risk credit profiles are more likely to utilize government lending programs instead of conventional loan programs. Given the state of the labor market and tight credit conditions, it is expected that many borrowers will continue to rely on the FHA for home financing needs

Mortgage Rates Down Slightly

NATIONAL RATE SURVEY RESULTS (10/08/2009 Results)

30-year Conv:          5.22% -- w/ avg. points: 0.34 pts

15-year Conv:          4.60% -- w/ avg. points: 0.34 pts 

30-year FHA:           5.13% -- w/ avg. points: 0.12 pts

5-year ARM:            4.66% -- w/ avg. points: 0.34 pts

PHH DAILY RATE CHANGES – LAST 10 BUSINESS DAYS

Date                       Conventional                                        FHA                                                                                             

10/08                     Slightly Lower                        Slightly Lower                        

10 Year Treasury Yield opens at 3.18

10/07                     Relatively Unchanged             Relatively Unchanged

10 Year Treasury Yield opens at 3.25 and closes at 3.18

10/06                     Relatively Unchanged             Relatively Unchanged

10 Year Treasury Yield opens at 3.20 and closes at 3.25

10/05                     Slightly Higher                        Slightly Higher                                          

10 Year Treasury Yield opens at 3.20 and closes at 3.22

10/02                     Slightly Lower                         Relatively Unchanged

10 Year Treasury Yield opens at 3.16 and closes at 3.11

10/01                     Slightly Lower                         Relatively Unchanged

10 Year Treasury Yield opens at 3.29 and closes at 3.17

10/01 (2)                Lower                                      Lower

- Stocks continues to slide lower and bonds gain strength

9/30                       Relatively Unchanged             Relatively Unchanged

10 Year Treasury Yield opens at 3.30 and closes at 3.30

9/29                       Slightly Higher                        Relatively Unchanged

10 Year Treasury Yield opens at 3.30 and closes at 3.29

9/28                       Relatively Unchanged              Relatively Unchanged

10 Year Treasury Yield opens at 3.33 and closes at 3.30

9/28 (2)                 Slightly Lower                          Lower

- Stocks end up mixed and bonds benefit

9/25                       Relatively Unchanged              Relatively Unchanged

10 Year Treasury Yield opens at 3.39 and closes at 3.33

RATE FORECAST

Will rates rise or remain relatively unchanged?

Industry experts and analysts provide their insights.

• 14% of respondents expect rates to fall in the coming weeks

• 29% predict a further increase in mortgage rates while the remaining

• 57% forecast that mortgage rates will remain more or less unchanged