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Mortgage Applications Rebound, Credit Scores Loosen

Phil Hall
Oct 21, 2015
The mortgage application picture for October is beginning to resemble an oscilloscope screen, with dramatic peaks and perilous drops coming one week after the other

The mortgage application picture for October is beginning to resemble an oscilloscope screen, with dramatic peaks and perilous drops coming one week after the other. Last week, the application scene was in ascension with help from federal loan programs.

According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Oct. 16, the Market Composite Index increased 11.8 percent on a seasonally adjusted basis from one week earlier. However, on an unadjusted basis the Index increased one percent compared with the previous week. (The MBA factored in the Columbus Day holiday as part of its number crunching.)

The seasonally adjusted Purchase Index increased 16 percent from one week earlier. But the unadjusted Purchase Index only increased five percent compared with the previous week; it was nine percent higher than the same week one year ago. The Refinance Index increased nine percent from the previous week, but the refinance share of mortgage activity decreased to 59.5 percent of total applications from 61.2 percent the previous week.

Government loan programs saw vigorous movement–the FHA share of total applications increased to 14.3 percent from 12.6 percent the week prior and the VA share of total applications jumped to 12.7 percent from 11.5 percent during the same period–and MBA’s Chief Economist Mike Fratantoni credited the federal input for driving up volume.

“On an adjusted basis, application volume increased last week, led by a sharp rebound in government volume,” Fratantoni said. “We expect that application volume will remain volatile over the next few weeks as the industry continues to implement TILA-RESPA integrated disclosures.”

Separately, new data released by Ellie Mae found the average FICO score on closed loans in September fell to 723, their lowest level since the Pleasanton, Calif.-based company began reporting data in August 2011.

Ellie Mae stated that credit availability on refinances appear to have increased in the third quarter while the overall average FICO and DTI have “loosened materially” from the second quarter.The company added that that refinances represented 42 percent of overall loan volume in September, up five percent increase from August, while the closing rate on purchase loans increased to 71 percent.

“It will be interesting to see if these trends continue as we begin to see impacts from TRID,” stated Jonathan Corr, president and CEO of Ellie Mae.

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