Tags: mortgage applications | home loan demand | housing | buyers

Mortgage Applications Plunge 27.6 Percent Amid New Home Loan Rules

Mortgage Applications Plunge 27.6 Percent Amid New Home Loan Rules

By    |   Wednesday, 14 October 2015 08:14 AM

Mortgage applications fell sharply last week, more than erasing the preceding week's strong jump, anxiety over new home-loan regulations, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

The Mortgage Bankers Association said their mortgage market index, a measure of mortgage loan application volume, fell by a seasonally adjusted 27.6% in the week ending October 9 to 387.0.

That follows a jump of 25.5% to 534.2 in the preceding week, just ahead of the implementation of new mortgage disclosure rules (known as TRID), CNBC reported.

Lenders had to make major changes to their loan processing systems, and the fear was that this would slow applications; borrowers, therefore, rushed to get applications in before the rules went into effect on October 3, CNBC reported.

The TRID change is part of a move by federal regulators to further protect borrowers by forcing lenders to disclose all details of a loan at least three days prior to closing, CNBC explained. The program aims to consolidate rules and disclosures in the Truth In Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA), Investors.com explained.

"The prior week's results evidently pulled forward much of the volume that would have more naturally taken place into this week," said Michael Fratantoni, MBA's chief economist. "Purchase volume for the week was below last year's pace, the first year over year decrease since February 2015, while refinance volume dropped sharply even with little change in mortgage rates."

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances held steady at 3.99%, unchanged from the prior week.

The survey covers over 75% of U.S. retail residential mortgage applications, according to MBA.

"Whether we look at TRID implementation likely boosting purchase applications or the impressive mortgage rate rally obviously juicing refinance demand, we have abrupt reversals in both of those things this past week. In other words, rates erased the gains and the TRID deadline has passed. Back to reality," Matthew Graham, chief operating officer of Mortgage News Daily, told CNBC.

But while it might make things easier for homebuyers, TRID will likely complicate things for mortgage lenders as well as realtors, both of whom have been scrambling to learn new rules and adapt to a new system that covers everything from how closing fees can be imposed to when closing documents must be finalized, Investors.com said.

Stringent mortgage rules stemming from Dodd-Frank legislation have created a regulatory minefield for banks and loan brokers, Bloomberg reported.

This year alone, the Consumer Financial Protection Bureau has handed out more than $260 million in fines for residential-mortgage rule violations. Automated processing of home loans, such as the services offered by Black Knight, gives lenders protection by vetting every action for compliance.

Lending rules that rarely changed before the housing crisis are now in constant flux, said Richard Green, sales manager in the mortgage division of Presidential Bank, in Bethesda, Maryland.

“People outside of the industry think last year’s regulations on qualified mortgages were a sea change for the industry, but they weren’t,” Green said. “TRID is bigger because it’s not just about who gets mortgages, it’s about how the mortgages are made and how lenders do business.”


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Mortgage applications fell sharply last week, more than erasing the preceding week's strong jump, anxiety over new mortgage regulations, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.
mortgage applications, home loan demand, housing, buyers
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2015-14-14
Wednesday, 14 October 2015 08:14 AM
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