Refinances Dive, Despite Low Mortgage Rates

Home refinances took their sharpest dive since last July as homeowners hoping to refinance current mortgages dried-up, despite home refinances near record low mortgage rates, according to the Mortgage Bankers Association.

The drop-off in mortgage applications for refinancing decreased 9.3% from the previous week, indicating that an Obama administration program offered through Freddie Mac and Fannie Mae has been all but accessed by homeowners hoping to refinance. The program dropped loan-to-value ratios for mortgage holders underwater on their mortgages that already had loans through both government backed lenders.

The average mortgage rate on a fully executed 30-year fixed rate loan with conforming loan balances ($417,500 or less) increased to 4.19% for the week from 4.06%, the banker’s survey indicated.

The average contract interest rate for a 15 year fixed rate mortgage was 3.47%, a jump from 3.36% a week earlier. The average contract interest rate for 5/1 ARMs increased to 2.90% from 2.81%.

The Mortgage Bankers survey also indicated that applications for home purchases declined a modest 1% from a week earlier. The four week moving average for the seasonally adjusted market index is down 2.79%.

The refinance share of mortgage activity dropped to 73.4% of all home loan applications across the  U.S., the lowest the average has been since last July.

“With rate-term refinances falling as we go forward, HARP will be a bigger percentage of refinances but will be more concentrated in certain states,” said Jay Brinkmann, the bankers’ vice president of research.  “Some of the largest institutions are reporting that the HARP share of their refinances remained at about 30% last week, but HARP volume is not equal across the country. The states that I started referring to years ago as the sand states that had the worst delinquencies we now should start calling the HARP states for mortgage refinances.

“We saw big state-level differences in refinance applications for February over January.  Florida  was up 49%,  Arizona was up 61%, and  Nevada  was up 71%.  Refinances in the rest of the country were generally flat or even down.”