Mortgage Applications to Avoid Repo Homes Up

The seasonally-adjusted index of the Mortgage Bankers Association (MBA) for mortgage applications jumped by 30 percent as of March 20, 2009.

Homeowners who applied for refinancing to avoid turning their properties into repo homes accounted for almost 78.5 percent of the total number of mortgage applications.

For the period covered, mortgage applications jumped by 32.2 percent to 1,159, with majority of applicants distressed homeowners who are trying to save their properties from becoming repo homes.

The volume of homeowners who applied for refinancing is expected to somehow reduce the growing number of repo homes in the country.

Foreclosure monitoring firm RealtyTrac’s U.S. Foreclosure Market Report for January 2009 showed that repo homes filings increased by 18 percent to 274,399 from the same month last year. The data also showed that one in every 466 homeowners received a repo homes filing in January.

Meanwhile, interest rates on mortgage loans declined after the U.S. Federal Reserve said that it would purchase Treasury securities and increase the amount of mortgage securities that it plans to buy.

The purchasing plans of the Federal Reserve are part of the department’s effort to lower mortgage rates to boost borrowings, reduce foreclosure rate and strengthen and stabilize the housing market.

According to associate vice president of MBA’s economic forecasting, Orawin Velz, the interest rate decline became a refinance incentive for distressed homeowners who want to save their properties from being added on the growing list of repo homes.

The MBA data showed that the cost of borrowing on a 30-year fixed mortgage is estimated to be 4.63 percent, a decline of 0.26 percent from a week before March 20. Furthermore, the interest rate dropped below last year’s level of 5.74 percent.

On the other hand, the excitement generated by low interest rates on refinancing did not transcend to loans to purchase homes.

The MBA index for seasonally adjusted purchases increased 4.2 percent to 267.8. However, the seasonally adjusted index was 33.7 below its percentage of 403.7 the previous year.

Meanwhile, some mortgage servicers have hired additional staff to handle the volume of refinance applications they received from homeowners who want to avoid foreclosures.

The index of MBA’s seasonally adjusted refinancing applications increased to 41.5 percent to 6,363.2. Index figures jumped by 49.5 percent from its previous year number of 4,255.2.

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