As a greater number of borrowers are choosing to stay in their homes rather than purchase new property, mortgage application activity decreased during the week ending February 10.
According to the Mortgage Bankers Association's Primary Mortgage Market Survey, application activity fell 1 percent from the previous week. Meanwhile, the survey indicated on a seasonally adjusted basis, the Purchase Index fell 8.4 percent in addition to the Market Composite decline.
However, as a sign of households choosing to stay in their homes, refinancing activity surged. The report found that refinancing accounted for an 81.1 percent share of all mortgage application activity. During the previous week, the share amounted to just 80.5 percent. The is the highest share refinancing has accounted for since the week ending January 20, 2012.
Specifically, a greater number of borrowers opted to refinance their home loans into more affordable fixed-rate mortgages. The Federal Reserve recently announced it plans to keep rates low until at least 2014 in order to give underwater households a greater number of options to qualify for lowering monthly mortgage payments. In contrast, the MBA indicated that fewer borrowers refinanced into adjustable-rate mortgages as activity in the share decreased to 5.4 percent from 6 percent the previous week.
As borrowers take advantage of more affordable rates, overall foreclosure activity in January was significantly lower than rates recorded at the beginning of 2011. However, from the previous month, activity inched 3 percent higher.
"Although overall foreclosure activity was down from a year ago for the 16th straight month in January, we continue to see signs on a local and regional level that the frozen-up foreclosure process is beginning to thaw," said RealtyTrac CEO Brandon Moore. "Foreclosure activity increased on a year-over-year basis for the first time in more than 12 months in Florida, Illinois, Indiana and Pennsylvania, following a pattern we saw in late 2011 in states such as California, Arizona and Massachusetts."
According to the data firm's Foreclosure Market Report, there were 210,941 foreclosure filings nationwide in January. But analysts from RealtyTrac claim that there could be an increase in activity in the coming year as the foreclosure process revamps after being put on hold in the wake of the robosigning scandal.
"We expect the pattern of increasing foreclosures to continue in the coming months, especially given the finalized mortgage and foreclosure settlement reached in early February between 49 state attorneys general and five of the nation’s largest lenders," Moore added. "The settlement sets forth clear guidelines for lenders and servicers to follow when foreclosing, which should allow them to push through some of the delayed foreclosures from last year."
Meanwhile, as industry experts continue to fear the worst for the country's existing-home market, the National Association of Home Builders claim that builder confidence has risen despite the dreary outlook for the foreclosure process.
According to the NAHB/Wells Fargo Housing Market Index, confidence increased to a reading of 29 in February – the highest the level has been in the past four years.
"Builder confidence has doubled since September as measured by the HMI," said NAHB chairman Barry Rutenberg. "Given the recent improvements in new home starts and the increasing number of markets included in the NAHB/First American Improving Markets Index, this consistency suggests that the housing market is moving toward more sustainable growth."
However, despite the gain, Rutenberg noted that the real estate industry remains fragile and called on lawmakers to continue to pass legislation that will ensure safety and soundness for a greater number of households.
