Mortgage Application Volume Increases
Last week, we saw mortgage application volume start to increase again as people returned from the holidays. Most of the economic attention fell on Employment figures for December. On Wednesday, ADP showed a much more positive employment change than expected, which sparked a rally in equities. This raised expectations for Friday’s payroll numbers, which didn’t meet those expectations. This sparked a drop in interest rates which was then propelled by a landmark ruling in Massachusetts, where the court ruled against several large banks and their foreclosure practices. The ruling means that more scrutiny will likely fall on banks nationally to be sure that all legal items are in order prior to starting any foreclosure proceedings. As for prior foreclosures, banks face challenges ahead as they deal with the risk of foreclosures being overruled by courts across the country. Thousands of foreclosures may be affected in Massachusetts alone. For this reason, bank stocks were noticeably lower on Friday.
As we head into the coming days and weeks, Fannie Mae and Freddie Mac announced that the cost of insuring loans with higher loan-to-value ratios is increasing, along with the cost of loans that have both a first and second lien (rather than just a single lien). This cost should make its way to borrowers in the coming days and weeks, and could mean as much as a 0.25% higher rate for certain loans among every lending institution across the country. Mortgage applications have been slightly higher in recent days, with borrowers looking to avoid these upcoming costs.
Today, news from Portugal and its possible need for EU economic relief has sparked a slight drop in mortgage rates as international investors seek shelter and stability with Treasuries and Mortgage investments. For the remainder of the week, most attention will be turned to fourth quarter company earnings that will begin to be released, along with inflation figures later in the week.