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Mortgage Loan Applications Down In Latest MBA Survey

January 31, 2002

Refinance Activity Decreases From Previous Week

WASHINGTON, D.C.-- The market composite index of mortgage loan applications-a measure of loan purchases and refinances-for the week ending January 25 decreased 25.5 percent to 538.9 on a seasonally adjusted basis from 723.4 the previous week, according to the Weekly Mortgage Applications Survey of the Mortgage Bankers Association of America (MBA), which was released today. On an unadjusted basis, the application index decreased 31.6 percent and was down 12.0 percent compared to the same week a year earlier.

The MBA seasonally adjusted Purchase Index decreased to 328.5 from 371.8 the previous week. The seasonally adjusted refinance Index decreased to 1762.9 from 2768.3 the previous week. Other seasonally adjusted index activity included the Conventional Index, which decreased to 713.8 from 972.6 the previous week, and the Government Index, which decreased to 247.1 from 307.3 the previous week.

The refinance index is now at levels comparable to those of summer 2001. Phil Colling, an economist in MBA?s Research and Business Development department, states, "In looking at a historical graph of both the 30-year fixed rate mortgage and the refinance index, the trigger point for a refinance boom is a 30-year fixed rate of between 7.00 and 7.25. When the 30-year fixed rate is above 7.25 percent, refinance activity tends to dry up. However, with the current 30-year fixed at around 7.0 percent, refinance activity should continue at a healthy pace."

Refinancing activity represented 50.3 percent of total applications, decreasing from 59.9 percent the previous week. The share of ARM activity increased to 16.3 percent from 14.6 percent the previous week.

The week ended January 25, 2002 was the first time since the week ended September 22, 2000 that the percent of ARM applications was above 16 percent. Doug Duncan, MBA?s Chief Economist, stated "The share of ARM applications is determined primarily by the absolute level of the 30-year fixed rate and the difference between the 30-year fixed rate and the 1-year ARM rate. Though the 30-year fixed rate is still relatively low, it is above 7 percent and has risen since the lows of October and early November of last year. Additionally, in recent weeks the difference between the 30-year fixed rate and the 1-year ARM rate is greater than it has been since September 1997. These factors have combined to make 1-year ARMs more attractive for borrowers."

The average contract interest rate for30-year fixed rate mortgages was 7.04 percent, increasing from 6.92 percent the previous week, with points decreasing to 1.31 from a revised 1.35 the previous week (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for15-year fixed rate mortgages was 6.49 percent, increasing from 6.34 percent the previous week, with points increasing to 1.31 from 1.30 the previous week (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for1-year ARMs was 5.29 percent, increasing from 5.26 percent the previous week, with points

Source: Mortgage Bankers Association

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