Since late last year, industry experts forecast a drop in mortgage refinancings as rates rise and a revival of purchase mortgages as the housing recovery creates business for lenders willing to working with home buyers. The spring housing market is here and now the mortgage market is following.
Purchase mortgages zoomed to their highest monthly market share since last August in Ellie Mae’s latest originations report, a sign that the mortgage business is shifting gears and the greatest boom in refis in recent years is ending. Loans to home buyers made up 38 percent of all loans processed by the nation’s largest mortgage processing platform, up from 32 percent in February and 27 percent in January.
The Mortgage Bankers’ Association reported that the refinance share of mortgage activity was unchanged at 75 percent of total applications from the previous week. The MBA’s weekly Purchase Index increased 4 percent from one week earlier is at its highest level since May of 2010 and the adjusted Conventional Purchase Index increased 3 percent to the highest level since October 2009. However, the MBA’s Refinance Index also increased 5 percent from the previous week and is at its highest level since mid-January of 2013.
The mortgage industry’s focus on refinancing loans rather than purchase loans has been a cause of the breakdowns is the lack of resources devoted to home buyers, according to some critics, especially Federal Reserve Governor Elizabeth Duke. Last month the staff of the Federal Reserve found that the increase in the refinance workload during the past 18 months appears to be associated with a 50 percent decrease in originations among home buyers with credit scores between 620 and 680 and a 15 percent decrease among buyers with credit scores between 680 and 720. New mortgages to purchase homes hit their lowest level since the early 1990s. Closing rates for all purchase loans fell to about 55 percent as recently as 18 months ago, and still today only about six in ten applicants are ultimately approved.