WASHINGTON (1/16/14)--A report indicating strong performance by the mortgage market last week was eclipsed by news of industry-wide difficulties.
The Mortgage Bankers Association market composite index was up by 11.9% for the week ending Jan. 10, according to data published Wednesday by the trade association. The MBA, however, said Tuesday that it reined in its forecast of market activity this year. Its predictions for purchase and refinance originations in 2014 were lowered to $677 billion and $440 billion, from $711 billion and $463 billion.
Compounding the sector's woes was another Wednesday report on the country's most prominent mortgage lenders' fourth quarter. Bank of America, the third-largest originator by market share, saw originations decline on annual basis by 46%, to $11.6 billion from $21.5 billion. Wells Fargo and J.P Morgan, the top two mortgage originators, saw originations drop on a year-over-year basis by 60% and 54%, to $50 billion and $23 billion, respectively (MarketWatch Jan. 15).
The MBA weekly survey however, showed that purchase and refinance activity were both up by 11.5% and 11.2% for the week ending Jan. 10.
Long-term problems for the industry are also evident in the recent MBA data, however. The four-week moving average of the refinance index is down by 16% over the past month and 65% over the past year. A similar measure of the purchase index is down by 4.4% on a monthly basis and 6.5% on a year-over-year basis. A 12-week moving average of the refinance applications component is at its lowest level since 2008, while a similar measure of the purchase index is at a two-year low (Economy.com Jan. 15).
Moody's said that the recent pessimism evinced by the MBA can likely be attributed to the rising cost of mortgage financing. Institutional investors have driven demand in recent months, but rising prices and a shrinking supply of distressed homes is slowing that trend. It's unclear if first-timers and homebuyers trading-up can pick up the slack, the ratings and research firm said.
MarketWatch, however, reported that falling demand could see conditions improve for borrowers, with recent Federal Reserve research indicating that bank loan officers are loosening mortgage standards. Mortgage interest rates measured by the MBA also receded slightly for the week ending Jan. 10. The averages for 30-year fixed-rate mortgages and 30-year fixed-rate jumbo mortgages both fell--by 6 basis points and 8 basis points to 4.66% and 4.58%. The five-year adjustable-rate mortgage was down by 5 basis points, falling to 3.28% at the end of the week.
The fixed-rate for 30-year conventional mortgages and the adjustable five-year mortgage rate are both up on an annual basis--by 105 and 62 basis points.
WASHINGTON (1/16/14)--The 12 Federal Reserve districts indicated economic activity expanded across most regions and sectors from late November through the end of the year, according to the Fed's Beige Book.
"The economic outlook is positive in most Districts, with some reports citing expectations of 'more of the same' and some expecting a pickup in growth," the Fed report said of the data collected on or before Jan. 6 in the Atlanta, Boston, Cleveland, Chicago, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, St. Louis and San Francisco districts.
The Beige Book provides anecdotal information about the economy to the Federal Open Market Committee two weeks prior to its scheduled meetings. The policy-making committee meets Jan. 28-29.
Wednesday's report from the Fed found retail spending was "modestly to moderately higher" in most areas compared with a year earlier. The Kansas City district said holiday sales were lower than expected, "which retailers there attributed to a shorter selling season and harsh weather conditions."
No substantial changes were reported in loan volume, although New York noted a "moderate" decline. Philadelphia, Richmond, Atlanta, Chicago, Dallas and San Francisco cited "slight to moderate growth." "Contacts in some Districts expressed concern about new banking regulations and their potential negative impact on lending and operating costs," the Fed reported.
Philadelphia, Chicago and San Francisco cited instances where financial institutions relaxed their underwriting standards, which was attributed to more competition in the lending field.
The decline in residential real estate loans in New York, Cleveland, Atlanta, Chicago and Kansas City was primarily due to reduced refinancing activity rather than fewer first mortgage applications. The latter has slightly increased in some districts, the Fed said.
Demand deposits volume increased in the Cleveland and Dallas districts, remained stable in Kansas City and decreased in the St. Louis district.
According to the Beige Book, most districts reported increases in home sales in the closing months of 2013 compared with last year, but some indicated that year-over-year residential sales growth had slowed relative to earlier quarters in 2013.
Home prices continued to trend upward in Boston, Atlanta, Chicago, Minneapolis, Kansas City and San Francisco, and remained stable in the Cleveland and Richmond districts.