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

Mortgage Applications Tumble as Interest Rates Spike Higher

Mortgage Applications Tumble as Interest Rates Spike Higher
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By    |   Wednesday, 04 November 2015 10:17 AM

Mortgage interest rates rose to the highest level in a month, pouring cold water on applications, according to the Mortgage Bankers Association.

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.8 percent on a seasonally adjusted basis from one week earlier.  Volume is still 10 percent higher than a year ago, largely due to stronger demand for home purchases, CNBC reported.

The refinance share of mortgage activity increased to 59.7 percent of total applications from 59.5 percent the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.01 percent from 3.98 percent.

"The troubling consideration is that the recent lows now run the risk of being cemented as a longer-term floor," wrote Matthew Graham, chief operating officer of Mortgage News Daily, CNBC reported. "With expectations for a December rate hike from the Fed, longer term rates (like mortgages) will have a hard time to committing to any significant move lower unless something happens that is clearly seen as staying the Fed's hiking hand."

Meanwhile, banks lowered lending standards for U.S. mortgages in the third quarter and a modest share of them made it easier for households to get credit card and auto loans, according to a survey of loan officers released this week by the Federal Reserve.

The U.S. central bank said the easing of standards for mortgages applied to loans that qualified to be guaranteed by state-run mortgage finance firms as well as for those that met government standards on borrowers' ability to pay.

The Fed survey covered the third quarter of 2015, and included the responses of 69 domestic banks and 23 U.S. branches and agencies of foreign banks.

Weekly mortgage applications have been volatile amid 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 survey covers over 75% of U.S. retail residential mortgage applications, according to MBA.

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.”

(Newsmax wire services contributed to this report).

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Mortgage interest rates rose to the highest level in a month, pouring cold water on applications, according to the Mortgage Bankers Association.
mortgage applications, home loan demand, housing, buyers
Wednesday, 04 November 2015 10:17 AM
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