Mortgage application activity fell during the week ending June 15, even though a greater number of borrowers utilized government initiatives to restructure their home loans into more favorable terms.
The loan application volume fell 0.8 percent, according to a report from the Mortgage Bankers Association. This decrease was the result of fewer prospective borrowers submitting purchase applications, as the refinance portion of the index rose 1 percent from a week earlier.
"Refinance volume increased again last week, but the composition of activity changed markedly," said MBA vice president of research and economics Michael Fratantoni, "Despite rates remaining near all-time lows, conventional refinance application volume declined, and the HARP share of refinance activity dropped to 20 percent."
However, these declines were offset by a surge in refinancing activity though Federal Housing Administration programs. Mortgage records indicate that the loan volume for FHA refinances doubled from the previous week. As a result, the share of refinancing increased to 81 percent of all home loan activity. Premiums hovering near all-time lows were responsible for this increase in demand, Fratantoni added.
During the week, the average rate for a 30-year fixed-rate mortgage backed by the FHA remained relatively unchanged at 3.72 percent. In addition, the rate of a 15-year FRM averaged 3.25 percent. These rates have been below 4 percent for much of 2012, and could be an additional factor for the increased activity in FHA refinances.
Lawmakers work to make refinancing more accessible
Meanwhile, there could be even more refinancing through government initiatives in the future, as legislators work to streamline the Home Affordable Refinance Program, The Hill reports.
Currently, HARP is only available to delinquent underwater borrowers with home loans backed by Fannie Mae and Freddie Mac. Under the proposed changes, the program would be offered to households saddled with negative equity but which are current on payments.
"Ranking Member Shelby and I are continuing to discuss a way forward on housing refinance legislation," Senate Banking chairman Tim Johnson said, according to the news source.
However, these proposed changes have been met with resistance on both sides of the political aisle. Some lawmakers say they would prefer to see the roles of Fannie and Freddie in the mortgage industry reduced and instead want to formulate plans to encourage more private sector lending. They argue that this could take pressure off of the Federal Housing Finance Agency, which oversees mortgage activity at the GSEs.