MBA: Applications drop but market is strong

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 19, 2020 shows the mortgage applications index fell 8.7%, on a seasonally adjusted basis,from one week earlier.

Despite the decline last week, MBA still anticipates refinance originations to increase to $1.35 trillion in 2020, the highest level since 2012.

“Even with high unemployment and economic uncertainty, the purchase market is strong,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Activity has climbed above year-ago levels for five straight weeks and was 18 percent higher than a year ago last week.”

Mortgage applications decreased last week, with both refinance and purchase activity falling “despite the 30-year fixed rate mortgage staying at 3.30 percent, the record low in MBA’s survey,” explained Kan. “Refinance applications dropped to their lowest level in three weeks, but the index remained 76 percent higher than a year ago.

Compared with the previous week, the adjusted Purchase Index decreased 3%, or 4% if unadjusted. Week-over-week, the refinance share of mortgage activity decreased to 61.3% of total applications from 63.2%, while the adjustable-rate mortgage (ARM) share increased to 3.1% of total applications.

One deciding factor “that may potentially crimp growth in the months ahead,” analysts wrote, is that the release of pent-up demand from earlier this spring is clashing with the tight supply of new and existing homes on the market. “Additional housing inventory is needed to give buyers more options and to keep home prices from rising too fast.”

The survey covers over 75% of all U.S. retail residential mortgage applications as reported by mortgage bankers, commercial banks and thrifts. The MBA has conducted the weekly survey since 1990, so the base period and value for all indexes is March 16, 1990 = 100. 

Genworth: COVID-19 flings biggest challenge at first-time buyers

The pandemic crisis represents the biggest challenge first-time homebuyers have faced since the 2008-2009 recession, according to a Genworth Mortgage Insurance analysis that assessed how the housing market evolved after COVID-19 hit the U.S. economy in the first quarter of 2020.

Q1 2020 marked “an important turning point” in the housing market leading into April and May, as the pandemic “pushed the U.S. economy into the sharpest recession on record in March,” said Tian Liu, chief economist at Genworth Mortgage Insurance. The pandemic indiscriminately affected first time and repeat buyers, credit and mortgage product availability.      

The COVID-19 effect on the housing market started to emerge when the first-time homebuyer demand fell almost 30% in April, before bouncing back by almost the same amount in May. Even though the housing market corrected in April, Liu explained, such volatility is atypical for a recession, and the reason for an uncertain, future market outlook.

Data show the first-time homebuyer market started 2020 strong. The total number of single-family homes purchased in Q1 2020 increase 14% year-over-year to 456,000, while the number of first-time homebuyers reached seasonally adjusted annual rates of 2.24 million in Q1, marking the fastest growth pace since 2006.

COVID-19 forced many first-time homebuyers to dislocate in April leading to a 27% decline in the number of rate locks by potential buyers, compared to March. The dislocation was even greater among repeat buyers, down by 34%, “in part because repeat buyers faced greater hurdles in selling their existing homes,” a problem first-time buyers do not have, the report notes. Once the country reopens however, repeat buyers most probably will see a stronger rebound.

Geographically, markets such as New York, Pennsylvania and Michigan where the pandemic was more pervasive and lockdown policies more strict, the decline in first time homebuyer activity was deeper in April, at over 50%. Similarly, the demand rebound in May was stronger. These facts show, “the virus and the public health policy choices made in response can have material impact on the housing market.”

Mortgage credit tightening across the housing market focused on high debt-to-income and low credit score borrowers. It caused a sharp contraction in first-time homebuyers with riskier credit profiles, or those relying on mortgages not backed by Fannie Mae and Freddie Mac.

Mortgage credit availability contracted in April, compared to the previous month. The number of first-time homebuyers taking out jumbo loans shrunk in half, FHA loans fell 36% and VA loans decreased by 23%.

In May, as the economy reopened, the first-time homebuyer market rebounded by 27%, compared to the 37% bounce in the repeat buyers’ market. First-time homebuyer demand rebounded across all mortgage products, at 41% for jumbo loans, 29% for FHA loans, and 24% for low down payment conventional loans.

Hunt provides $24.2M in manufactured housing loans in AZ

Hunt Real Estate Capital (HREC) announced it has provided three Fannie Mae conventional loans totaling $24.2 million, which will finance three manufactured housing communities (MHCs) in Arizona’s greater Phoenix area.

These properties, which contain 519 units and are four-star parks restricted to tenants 55 and older, are made for single and double-wide homes and RV rental spaces,” said Bryan Cullen, senior managing director at HREC. “The owner will continue to install park models in a number of spaces as the market demands,” and will serve well the senior community of Apache Junction.

A division of ORIX Real Estate Capital, HREC specializes in financing multifamily, affordable and manufactured housing, and commercial real estate backed by Fannie Mae and Freddie Mac.

The development manager currently is engaged in 2,090 sites in the western U.S. and is a repeat Hunt client and Fannie Mae borrower.

All three loans are limited to Tier 4 underwriting standards, at 1.55 debt service coverage (DSC) and 55% loan-to-value (LTV)) and carry 15-year, interest-only terms. The refinancing “lowered the rate significantly and provided cash out to the borrower while retaining reliable, long-term cash flow,” the company said in a statement. 

“These loans were very rate sensitive, so we had to rate lock before we even hired the third parties,” said Brian Mills of Real Estate Capital Advisors, a representative of the borrower. “Hunt kept an eye on the market and was able to lock during a small window in mid-March before the markets softened dramatically.”

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