Applications for purchase mortgages surged 11.9 percent for the week ending November 13th after a tepid 0.1 percent gain in the prior week, but the 4-week moving average remains strong.
The volume of applications surged in the lead up to the implementation of the new Know Before You Owe (KBYO or TRID) rules on October 3rd, pulling forward many applications that would have registered later in October. A boom and bust pattern developed in subsequent weeks, which appears to have stabilized and gained traction with a new crop of buyers.
The 4-week moving average, a means of smoothing this weekly volatility, sat at 19.7 percent stronger than a year earlier and up from 15.2 percent two weeks earlier, reversing slippage in the weeks following implementation of TRID.
The gains were concentrated in the government sector which jumped 15.5% compared to a 10.4% gain in the conventional space.
The average contract rate on a 30-year fixed inched 6 basis points higher to 4.18 percent. Though slightly up from last week, it is roughly in line with the 4.17 percent average rate at the same time in 2014. Rising rates tend to have a stronger impact on refinances than on purchase applications, but refinance gained only 2.0 percent lagging the outsized gains in the purchase market.
This week’s pattern of stabilization is likely to continue in the weeks ahead, but could remain choppy as originators wrestle with the new regulatory environment. Applications will remain far stronger than the fall of 2014.
In the long term, the rule should help to make the process a more transparent process for consumers. Luckily the change was timed for the fall, a slower period, the Consumer financial Protection Bureau has signaled its intention to hold lenders harmless so long as they perform a “best effort” to comply in the near term.
Anecdotes suggest a modest degree of confusion with the new rules among lenders and lawyers. Some lenders may be better prepared for the changes than others. Consumers and Realtors should shop a variety of lenders, while consumers can ask their Realtor for her experiences with various lenders in the TRID environment.
Ken Fears is the Manager of Regional Economics and Housing Finance Policy. He focuses on regional and local market trends found in the Local Market Reports and the Market Watch Reports . He also writes on developments in the mortgage industry and foreclosures.