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May 5, 2014

Weekly mortgage applications fall to lowest since 2000, according to MBA data

The volume of weekly mortgage applications dropped to its lowest in almost 14 years during the week ending April 25, according to data from a recent Mortgage Bankers Association survey.

This poll provides comprehensive figures on the market, as it covers 75 percent of all retail residential mortgage applications.

The decline in these mortgage applications could potentially impact the price and volume of loan sales. As a result of the supply of mortgages falling, these transactions could move lower. In addition, a shortage could push up the price of loan portfolios. Financial institutions that want to leverage this opportunity might get a better price by selling their debt.

Mortgage applications drop
The MBA's Market Composite Index fell 5.9 percent on a seasonally adjusted basis from the previous week. Without being adjusted for seasonal factors, this measure dropped 5 percent from the prior period. The unadjusted Purchase Index declined 21 percent from the same week in 2013.

"Both purchase and refinance application activity fell last week, and the market composite index is at its lowest level since December 2000," Mike Fratantoni, MBA's chief economist, said in a statement. "Purchase applications decreased 4 percent over the week, and were 21 percent lower than a year ago."

Refinancing's share nears 5-year low
Requests to refinance fell to 50 percent of all applications, which was their lowest portion since July 2009, according to The Wall Street Journal.

Interest rates fall for many mortgages
It is worth noting that applications declined even as borrowing costs for several different mortgage products fell during the period, the media outlet reported. Rates for fixed-rate mortgages with jumbo loan balances declined to 4.37 percent, compared to 4.41 percent during the prior week.

Those for 15-year, fixed-rate contracts dropped to 3.53 percent from 3.55 percent in the prior week, according to the news source. Federal Housing Administration-backed mortgages also saw their rates move lower, falling to 4.17 percent from 4.2 percent during the week before.

While these different financial products experienced declining borrowing costs, 30-year, fixed-rate mortgages with conforming loans saw their rates hold steady at 4.49 percent.

Market expert notes interesting situation
Fratantoni pointed out this situation, noting that while no mortgage products saw their rates go up, refinancing dropped during the period.

"Refinance activity also continued to slide despite a 30-year fixed rate that was unchanged from the previous week," the market expert stated. "The refinance index dropped 7 percent to the lowest level since 2008, continuing the declining trend that we have seen since May 2013."

Financial institutions that are interested in getting involved in loan sales might consider contacting Garnet Capital Advisors, which has significant experience in this particular area.