Mortgage applications increased 5.3% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 15, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 5.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 5.9% compared with the previous week. The Refinance Index increased 2.7% from the previous week. The seasonally adjusted Purchase Index increased 10.0% to its highest level since December 3, 2010, driven largely by a 17.6% increase in Government purchase applications. The unadjusted Purchase Index increased 10.9% compared with the previous week and was 11.4% lower than the same week one year ago.
“Purchase application volume jumped last week largely due to another sharp increase in applications for government loans. Borrowers were likely motivated to apply for loans before the scheduled increase in FHA insurance premiums,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Refinance activity increased somewhat, as rates dropped to their lowest level in a month towards the end of the week.” The four week moving average for the seasonally adjusted Market Index is down 2.9%.
The four week moving average is up 2.5% for the seasonally adjusted Purchase Index, while this average is down 5.7% for the Refinance Index. The refinance share of mortgage activity decreased to 58.5% of total applications from 60.3% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.5% from 5.9% of total applications from the previous week.
For Fannie/Freddie lenders to approve a mortgage to finance purchase of a condo, a large majority of the units -- 70% -- have to be already sold or under contract to individuals. Before 2009, the threshold was 51%. If more than 30% are still owned by the company that built the complex or sponsored its conversion from rental units, the mortgage will be denied, no matter how qualified the buyer is. Fannie and Freddie have also increased their emphasis on income relative to debt. If someone's total debt payments exceed 45% of income, the mortgage will be denied. In 2009, the limit was 55%.
Some borrowers lost homes to foreclosure but then diligently rebuilt their financial health. Despite high credit scores, ample assets and income and steady employment, lenders are not allowed to finance their Fannie/Freddie mortgages if their foreclosures happened any time within the past seven years. Before spring last year, the wait time was five years. Fannie and Freddie also have gotten stricter in how they factor in missed payments on credit cards, auto loans and other debts in which the balances do not have to be paid off every month. They used to be okay with a missed payment or two. Now, one missed payment will hit your debt-to-income ratio, because banks will add 5% of your outstanding loan balance to the debt part of the calculation.
Gold tops $1500
Gold prices topped a record $1,500 for the first time ever yesterday, shattering an important psychological barrier as investors seek out investments thought to be safe during times of upheaval. The price spike also comes against the backdrop of market uncertainty that has sent investors looking for an alternative to the weak U.S. dollar. And gold has been the marquee beneficiary. Standard & Poor's lowered its outlook for America's long-term debt to "negative" from "stable," based on uncertainty surrounding the nation's fiscal problems. That's exactly the type of news that creates a flight to safe haven assets like gold.
Gold futures for June delivery hit an intraday record of $1,500.50 an ounce near midday, before retreating to settle at $1,495.10 an ounce -- also a new record. The price of gold has tracked steadily higher in recent months, as a cavalcade of unsettling world events created uncertainty in global markets. Since the start of the year, investors have been forced to consider the implications of a Japanese tsunami, earthquake and nuclear disaster. That's in addition to a spike in crude prices and a slew of revolts in the Middle East and North Africa. Inflation -- which gold is often used to hedge against -- has been rising sharply in emerging economies and is becoming more of an issue in Europe.
Mortgages harder to get
Banks are reluctant to make loans without the Fannie and Freddie guarantee, and loans backed by them account for just about every mortgage written these days. In 2009, the agencies lifted the minimum credit score that borrowers must have from 580 to 620. That's probably for the best. But they've pushed through a host of other requirements as well, and that means real estate deals don't get done, even for some relatively low-risk borrowers. "You can have one Fannie/Freddie guideline you violate and that gets you rejected," said Alan Rosenbaum of GuardHill Financial. According to the Federal Reserve, a quarter of all mortgage loan applicants get denied. Many other potential homebuyers never even try to get loans, said Jerry Howard, president of the National Association of Home Builders.
Slow comeback for offshore drilling
One year after BP's Macondo well blew out -- claiming 11 lives and sparking a ban on deepwater drilling -- 11 new deepwater and 49 shallow water drilling permits have been issued, according to the federal agency that oversees offshore drilling. That's far less than usual. But given that most of these new permits have come in the last few months, it's a welcome sign for many in the industry who feared for their livelihoods. The government had stopped granting permits to drill new oil and gas wells, saying it needed time to reform a regulatory agency that was rife with conflicts of interest and too lax in its oversight.
Those reform efforts are ongoing. So far they have included splitting the agency into two parts to separate the revenue collection division from the enforcement unit, strengthening safety and environmental requirements and hiring more inspectors. Permits for shallow water wells resumed last summer, albeit it at a slower pace than many in the industry would have liked. The first deepwater permit since the spill was issued in February.
According to the U.S. Energy Information Agency, Gulf oil production will drop by 190,000 barrels a day in 2011 and 2012 due to permitting delays and natural field declines. In total, the country produces just under 10 million barrels of oil a day and consumers use about 19, according to EIA. Most Americans support increased offshore drilling. 69% are in favor of expanding the practice, up from 49% right after the spill.
National delinquency rate drops
The national delinquency rate continued to fall in March, according to the "First Look" report from Lender Processing Services, down to 7.8%. The report provides month-end mortgage performance statistics from LPS' loan-level database of nearly 40 million mortgages. The Jacksonville, Fla.-based firm will release more detailed reporting in its upcoming "Mortgage Monitor" report, which comes out at the end of this month.
The delinquency rate has consistently decreased throughout all of 2011. March's figure is down 11.6% compared to February and down 19.4% compared to March 2010. This still accounts for an estimated 4.1 million homes that are 30-plus days delinquent, LPS reported. Approximately 2 million of those are seriously delinquent, meaning 90-plus days delinquent but not in foreclosure. There are also an estimated 2.2 million homes that make up the foreclosure pre-sale inventory, LPS said. Florida posted the highest percentage of noncurrent loans statewide in January, followed by Nevada, Mississippi, New Jersey and Georgia. The states with the least%age were, in descending order, Montana, Wyoming, Alaska, South Dakota and North Dakota.
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