Mortgage Applications Fall For Week

Home purchase and mortgage refinance applications fell in the last seven days, an industry trade group said Wednesday, in yet another sign that housing remains stuck in a rut.

U.S. mortgage application activity dropped 3.4 percent to a seasonally adjusted 643.7 in the week ending June 15, the Mortgage Bankers Association reported in its weekly survey.

The drop in applications piled on to reports from U.S. home builders and the federal government this week predicting that any sustained housing market rebound is at least half a year away.

Sentiment among home builders sank to its weakest level this month in more than a decade and a half, based on an index reported Monday by the National Association of Home Builders.

Housing starts fell more than 2 percent in May as builders struggle with a stockpile of unsold inventory, the Commerce Department said Tuesday.

The group expects that with recent mortgage woes, building and sales will keep eroding until late this year before starting to recover in 2008.

On Wednesday, the seasonally adjusted purchase index fell 3.0 percent to 450.9 while mortgage refinancing applications index slid 4.2 percent to 1,776.8 on a seasonally adjusted basis.

Thirty-year mortgage rates, the industry’s benchmark loan, declined by 0.01 percent last week to 6.60 percent. Average 30-year mortgage rates were in this area a year ago, in July 2006.

Last week, the MBA reported that home mortgage loan problems continue to mount, forcing U.S. homeowners to begin foreclosure proceedings at a pace not seen before the last three months.

BAD CREDIT MORTGAGE IMPACT

Among the bigger problems were subprime, or bad credit mortgages, in some of the markets that had been the hottest during the five-year record home price and sales spree earlier this decade.

Risky bad credit home loan borrowers are increasingly being pushed into the foreclosure process as their adjustable loans reset at much higher rates, boosting payments beyond reach.

In Tuesday, Federal Reserve economist John Duca cautioned that the housing slump could be prolonged by lenders cutting back home loans to subprime borrowers, or those with blemished credit histories.

Many mortgage broker and lender groups have quickly become more restrictive in response to the mounting late payments and foreclosures.

As a result, more applications are being rejected, and builders worry that rising mortgage rate hikes will weaken demand for real estate already pressured by tighter mortgage lending practices.

SOURCE: Reuters