Mortgage Applications Take Surprising Turn

Loan demand was on the rise last week, posting a strong rebound that was driven mostly by applications to purchase a home, the Mortgage Bankers Association reports in its seasonally adjusted weekly mortgage market survey, reflecting the week ending Nov. 14. The increase in demand came despite interest rates mostly staying flat for the week.

Total application volume, reflecting applications for home purchases and refinances, climbed nearly 5 percent. Refinance applications rose 1 percent week-to-week, while applications for home purchases, viewed as a gauge of future buying activity, surged 12 percent. It was the highest level for purchase applications since July, the MBA reports.

“The MBA and other data are showing strength in the market for new homes, likely reflecting the boost from continued job growth in recent months,” says Michael Fratantoni, the MBA’s chief economist.

Meanwhile, the 30-year fixed-rate mortgage declined slightly last week to 4.18 percent from 4.19 percent the week prior, the MBA reports.

Source: “Weekly Mortgage Applications Jump Unexpectedly,” CNBC (Nov. 19, 2014)

FICO Scoring Changes May Help More Qualify for Loans

FICO, the nation’s most popular credit-scoring system, announced it is tweaking some of the criteria used in coming up with consumers’ scores, which could help consumers save more money in qualifying for mortgages and other types of loans.

The changes include reducing the toll that overdue medical bills can take on credit scores, as well as removing other past penalties from consumers who have paid off debts that had been assigned to collection agencies. A consumer whose only major delinquency comes from an unpaid medical bill could see their credit score rise by 25 points due to the changes.

The changes come after a recent Consumer Financial Protection Bureau study, which found that both paid and unpaid medical debts were unfairly penalizing consumers’ credit ratings. An estimated 64 million Americans have a medical collection item on their credit reports, according to Nick Clements of Magnify Money, a personal finance site.

The FICO changes will go into effect this fall, but borrowers may have to wait a year or more until they see the impact of the changes in their scores, lenders say.

The changes may help consumers with blemished past credit histories or high medical debts qualify for mortgages more easily. Consumers with higher scores also might qualify for a lower rate, housing experts say.

Source: “New FICO Criteria Could Help Borrowers,” Los Angeles Times (Aug. 8. 2014) and “Experian, TransUnion Start Adding Rent Payment Data to Credit Profiles,” Los Angeles Times (Aug. 10, 2014)

 

Mortgage Rates Fall, But Rises Likely Next Week

Freddie Mac says that the drop in mortgage rates this week may be temporary, due to the Fed’s recent announcement that it would begin winding down its bond-purchasing stimulus program sooner than originally thought.

The Federal Reserve hinted Wednesday that interest rates could start to rise in early 2015, and that it is continuing to taper its economic stimulus programs, including its bond-purchase program that had been aimed at holding down long-term interest rates and increasing job growth. The Fed said that rates could remain low for “a considerable time” after its bond purchase program ends, but new Fed Reserve Chair Janet Yellen then later clarified that would be about six months time frame.

“The rate on the 10-year treasury note rose following the Fed’s announcement Wednesday afternoon and, if this holds, interest rates may begin to trend higher going into next week,” says Frank Nothaft, Freddie Mac’s chief economist.

Freddie Mac reported the following national averages for the week ending March 20:

  • 30-year fixed-rate mortgages: averaged 4.32 percent, with an average 0.6 point, dropping from last week’s 4.37 percent average. Last year at this time, 30-year rates averaged 3.54 percent.
  • 15-year fixed-rate mortgages: averaged 3.32 percent, with an average 0.6 point, falling from last week’s 3.38 percent average. A year ago, 15-year rates averaged 2.72 percent at this time.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.02 percent, with an average 0.4 point, falling from last week’s 3.09 percent average. A year ago, 5-year ARMs averaged 2.61 percent.

Source: Freddie Mac and “Fed Changes Guidance on Raising Rates,” USA Today (3/19/14)