Foreclosures Rising Again

Foreclosures rising again In a front page above-the-fold article today, the Wall Street Journal reported what we mentioned the other day - that some of the largest mortgage companies in the US are stepping up foreclosures on delinquent homeowners. Companies had temporarily halted foreclosing on borrowers as they waited for the details of the Obama administration's housing rescue plan and changes in state laws, but are now moving the backlog through the foreclosure process. The resulting increase in the supply of foreclosed homes could further depress home prices and put additional pressure on bank earnings as troubled loans are written off. Of course, now that some of these institutions have received bailouts, are we in for another round of congressional pillorying because mortgage companies have the audacity to want their lenders to pay their bills? Mortgage applications fall The Mortgage Bankers Association (MBA) released its weekly Market Composite Index (MCI), a measure of mortgage loan application volume, announcing a decrease of 11.0 percent to 1113.2, on a seasonally adjusted basis from 1250.6 one week earlier. On an unadjusted basis, the Index still decreased 10.9 percent compared with the previous week and increased 45.6 percent compared with the same week one year earlier. The Refinance Index decreased 10.9 percent to 6071.7 from 6813.5 the previous week and the seasonally adjusted Purchase Index decreased 11.3 percent to 264.1 from 297.7 one week earlier. The Conventional Purchase Index decreased 13.5 percent while the Government Purchase Index (largely FHA) decreased 7.7 percent. The refinance share of mortgage activity decreased to 77.8 percent of total applications from 77.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 1.5 percent of total applications from the previous week. Admittedly, the MBA doesn't count Easter/Passover holiday, but this wouldn't likely have the same impact on it as it did on the Consumer Price Index, which also fell in March. Meanwhile, what are mortgage rates doing? During the prior five-week run in applications, average 30-year mortgage rates sank by as much as a half percentage point before starting to trend up again. In the week ended April 10, the average rate for fixed-rate 30-year mortgages dipped to 4.70 percent from 4.73 percent the prior week. It hit an all-time low of 4.61 percent two weeks ago, the MBA said, stimulating a rush of refinancing by people trying to cut costs. New home purchases had lagged, but were still higher over the past five weeks. Analysts speculate that the Federal Reserve's pledge to buy up to $1.45 trillion in mortgage-related securities and $300 billion of U.S. Treasuries this year may drop rates even lower. After all, the Fed is only about one-quarter of the way through these purchase programs, and the Treasury is also consistently buying mortgage bonds each month. Nancy Vanden Houten, analyst at Stone & McCarthy Research Associates in Princeton, New Jersey, confirms the obvious: ""We think the F ed and Treasury buying programs have produced mortgage rates that are significantly lower than they would have been otherwise."