MBA Mortgage Applications 12-19-12

TRADEX GLOBAL INTERNAL COMMENTARY

The Mortgage Bankers Association reported that application totals (re-fi and new home applications) fell 12.3% in the week ending December 14th. The refinancing component fell a larger amount, 13.8%, while new home applications fell 4.8%. The re-fi share of total applications also fell to 83% from 84% in the prior week. Fixed 30-year conforming rates rose slightly to 3.50% from 3.47% the week before. These weekly numbers can be volatile and slightly misleading, but we do believe that the re-fi wave is cresting and re-financings will slow in the first half of 2013. This is a good report and gives us greater confidence in our IO (interest only derivatives) portfolio that we plan on increasing. An underappreciated statistic is that banks have approximately 265k employees to work with borrowers that want to refinance their existing loans or to get a new mortgage, down from a peak of 500k employees.  A good amount of employees at those banks are doing ‘workouts’ and foreclosures. This may be intentional on the banks part to slow down the whole business and wait for higher rates. That is not fact, but I would not discount it. Keep nimble – Michael Beattie  

EXTERNAL RESEARCH COMMENTARY

Applications for home mortgages fell to their lowest level since early November last week and the purchase index fell after a five-week climb, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 12.3 percent in the week ended December 14. The MBA's seasonally adjusted index of refinancing applications fell 13.8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 4.8 percent, dropping from its high point on the year. The refinance share of total mortgage activity fell to 83 percent of applications from 84 percent the week before. Fixed 30-year mortgage rates averaged 3.50 percent in the week, up three basis points from 3.47 the week before, which was the lowest in the history of the survey. The rise in rates came even with the Federal Reserve's announcement last week that it would purchase more Treasury securities each month. "Rates increased in the second half of the week," said Mike Fratantoni, MBA's Vice President of Research and Economics. The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

@Tradex_Global