Mortgage Market Weekly Update: September 10 - 14, 2012

Includes: REM, REZ
by: Julie Young

Mortgage markets received a boost last week from the Federal Reserve's Federal Open Market Committee. The FOMC announced that it would add mortgage-backed securities purchases to its current maturity extension program in an effort to push mortgage rates down further and create greater housing demand through access to even lower borrowing rates.

Mortgage rates held steady for the week as markets await the effects of the future MBS purchases. Freddie Mac's weekly Primary Mortgage Market Survey showed no change in the average 30-year fixed-rate mortgage, which remained at 3.55 percent for the week. Rates measured by the PMMS for 15-year FRMs fell 1 basis point, averaging 2.85 percent for the week.

The Mortgage Bankers Association's Weekly Application Survey showed an increase in mortgage applications for the first time since the July 26 week. Mortgage loan applications increased 11.1 percent, according to the report. The MBA's Refinance Index gained 12 percent for the week, increasing the refinancing share of mortgage applications to 80 percent from 79 percent in the previous week. Home purchase applications, also measured by the MBA, increased 8 percent for the week.

Average 30-year contract interest rates reported by the MBA for loans below $417,500 decreased to 3.75 percent from 3.78 percent in the previous week. Thirty-year average contract rates reported by the MBA for loans above the $417,500 level decreased as well, falling 5 basis points from the previous week to 4.00 percent.

Freddie Mac also released its September 2012 U.S. Economic and Housing Market Outlook (pdf) on Wednesday, September 12, which showed positive growth projections in the housing market for the months ahead. Additionally, even greater improvements to the GSE's September Outlook are likely to occur as a result of the Federal Reserve's new actions for economic stimulus announced following the FOMC's September 12 - 13 meeting. Freddie Mac's September Economic and Housing Outlook predicted steady improvements in housing starts and home sales for the third quarter of 2012 with minimal changes in housing price appreciation expected in the off-peak quarter.

CoreLogic also added to the week's news, releasing its September MarketPulse and Second-Quarter Negative Equity reports. The September MarketPulse report highlighted the effects of land value on overall home prices and reiterated the growth occurring in housing sales, starts and prices as well as the decline occurring in the number of distressed properties. The September report also introduced the research company's new Real Estate Strength Index, which provides detail on housing markets by metropolitan area based on three sub-components: economic health, real estate health and mortgage finance risk.

CoreLogic provided further reinforcement for the improvement in housing markets in its Second-Quarter Negative Equity report released on September 12. The report stated that the number of underwater borrowers in the U.S. decreased by 1.4 percent in the second quarter, falling from 23.7 percent in Q1 2012 to 22.3 percent in Q2 2012. As distressed properties continue to account for a smaller share of the markets' inventory, this statistic is expected to continue declining, providing greater improvements in average home values.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.