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MBA Reports Jump in Mortgage Apps
The rising delinquency rate on sub-prime mortgage loans has received a lot of attention lately. It has been cited as a factor in the recent stock market sell-off. It certainly is an issue for many companies involved in that industry. This morning, there was a news article suggesting that General Motors may take a hit of as much as $1 billion for bad loans in that sector.
Still, the concerns that defaults in that sector could lead to a broader
restriction of credit that would hurt the overall economy are as yet
unsubstantiated.
The Mortgage Bankers Association reported this morning that the volume of
mortgage applications was up 7.3% in the week ended March 2, and up 15.6% from a
year ago. There is absolutely no sign of any restriction of credit extension in
these figures.
Instead, the drop in mortgage rates was far more important. The 30-year fixed
rate dropped to 6.04% from 6.16% due to the rally in the bond market. That led
to a surge in refinancing applications. Applications for purchase were up only
1% for the week, but that is still good in an industry where flat home sales
right now would be just fine.
Also, although the surge in mortgage applications this week was due primarily
to refinancing, that is just as much a reflection of credit extension issues as
are purchase applications. Mortgage credit is available.
The problems in the sub-prime mortgage industry are not having a macro-economic
impact. So far, they are industry specific. There is no evidence yet of a broad
impact on the housing sector.
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