MBA Mortgage Applications 7/24/13

TRADEX GLOBAL INTERNAL COMMENTARY

MBA reports another weekly decrease in mortgage applications.

The composite index dropped 1.2% on a seasonally adjusted basis from the prior week (the composite covers both refinancing and new purchases). The refinancing component of the composite was down 1%, and the share of applications to the total was 63%. This was unchanged from the prior week, but a long way off from the earlier part of the year when the refinancing component was 90% of total applications. A detail that is of great interest is that the agency mortgage refinancing component was down 12% from the prior week.  We feel this will have a strong positive effect on our agency IO portfolio. I have been talking about this trend for a few months, and believe that we are just about at the end of the greatest refinance wave in history, as HARP and other government programs start to burn out.  Another interesting number this week is that non-agency mortgage refinancing actually rose 2%. The reason for this is that HPA is giving homeowners more equity back in their homes; this equity will enable them to take advantage of lower rates. Overall, the current trends in RMBS, CMBS and IO’s are about as favorable as we have seen them in the past few years. The Liquid Real Estate Portfolio has annualized in the 12% range for the last three and half years, and we expect the IO portion of the portfolio to help generate an even higher return going forward. Keep nimble – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

The total number of mortgage applications filed in the U.S. last week slipped 1% from the prior week, the Mortgage Bankers Association said Wednesday. The market composite index decreased 1.2% on a seasonally adjusted basis from a week earlier, according to the weekly survey covering more than three-quarters of all U.S. residential-mortgage applications. MBA also reported the refinance index fell 1% from a week earlier to reach its lowest level in two years, driven by a 12% decline in the government refinance index while the conventional refinance index rose 2% The seasonally adjusted purchasing index was down 2% from the prior week. A recent run-up in interest rates has curbed some individuals' appetite to buy a new home and reduced the appeal of mortgage refinancing, though in the latest week mortgage rates fell. The share of applications filed to refinance existing mortgages remained unchanged from the prior week at 63%. Adjustable-rate mortgages, or ARMs, decreased to 7% of total applications. The average rate on 30-year fixed-rate mortgages with conforming loan balances slipped to 4.58% from the prior week's 4.68%. Rates on similar mortgages with jumbo-loan balances slid to 4.66% from the previous week's 4.81%. The average rate on 30-year fixed-rate mortgages backed by the Federal Housing Administration fell to 4.28% from 4.38% a week earlier. The average rate for 15-year fixed-rate mortgages decreased to 3.63% from the prior week's 3.7%. The 5/1 ARM average declined to 3.3% from 3.39% a week earlier.

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