Mortgage Application Activity and Forbearance Levels Go in Decline

Mortgage application activity and mortgage forbearance levels are falling, according to new data from the Mortgage Bankers Association (MBA).

The Market Composite Index, the MBA’s measure of mortgage loan application volume, decreased 6.6% on a seasonally adjusted basis for the week ending Feb. 14 compared to one week earlier. On an unadjusted basis, the index decreased 4% compared with the previous week.

The seasonally adjusted Purchase Index dropped 6% from one week earlier while the unadjusted index dipped 1% compared with the previous week – the latter was also 7% higher than the same week one year ago. The Refinance Index decreased 7% from the previous week and was 39% higher than the same week one year ago, while the refinance share of mortgage activity decreased to 38.7% of total applications from 40.2% the previous week.

Among the federal programs, the FHA share of total applications increased to 16.6% from 16% the week prior while the VA share of total applications decreased to 14.2% from 14.6% and the USDA share of total applications increased to 0.6% from 0.5%.

Separately, the MBA reported the total number of loans now in forbearance decreased by 7 basis points from 0.47% of servicers’ portfolio volume in December to 0.40% as of Jan. 31. According to MBA’s estimate, 200,000 homeowners are in forbearance plans.

The MBA noted the share of Fannie Mae and Freddie Mac loans in forbearance decreased 2 basis points to 0.17% last month while Ginnie Mae loans in forbearance decreased by 19 basis points to 0.88%, and the forbearance share for portfolio loans and private-label securities remained the same as the prior month at 0.40%.

“While the number of forbearance requests grew in January, the number of forbearance exits outweighed that pick-up, reaching the highest level since June 2022,” said Marina Walsh, MBA’s vice president of industry analysis. “This outcome was somewhat surprising given the recent events in California, but it speaks to recovery in other parts of the country affected by natural disasters and the movement of aged government loans out of forbearance. As the number of borrowers in forbearance dropped this past month, the number of borrowers with permanent loan workouts grew. Today, approximately 6.5% of all borrowers – or 3.3 million homeowners – are in a loan workout completed in 2020 or after.”