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October 2020

Mortgage activity wanes with various reasons cited

October 8, 2020

Mortgage availability in August dropped to its lowest level since March 2014, according to an index from the Mortgage Bankers Association. The group suggested the weak economy is prompting lenders to tighten standards.

Credit continues to tighten because of uncertainty still looming around the health of the job market, according to Joel Kan, MBA's associate vice president of economic and industry forecasting. "A further reduction in loan programs with low credit scores, high LTVs, and reduced documentation requirements also continued to drive the overall decline in credit availability," he explained.

In another report, MBA said its Weekly Application Survey for the week ending September 25, 2020 showed a decrease in application activity, both in purchasing and refinancing. Volumes dropped 4.8% from the prior week.

The decreases were despite a 5 basis points decline in rates to 3.05%, the lowest in MBA's survey.

"There are indications that refinance rates are not decreasing to the same extent as rates for home purchase loans, and that could explain last week's decline in refinances," stated Kan. "Many lenders are still operating at full capacity and working through operational challenges, ultimately limiting the number of applications they are able to accept," he added.

Kan said even though purchase applications decreased in late December, activity was strong at a year-over-year growth rate of 22 percent. He also noted there continues to be considerable action in the high price tiers, with the average loan balance remaining close to an all-time survey high.

MBA's survey, conducted weekly since 1990, covers over 75 percent of all U.S. retail residential mortgage applications. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.

The MBA's credit availability indices analyze data from Ellie Mae's AllRegs Market Clarity covering several factors related to borrower eligibility such as credit scores, loan type, and loan-to-value ratios. The data comes from about 95 lenders and investors, MBA said.

MBA represents all segments of the real estate finance industry. It has more than 2200 members.