Are record-low interest rates masking high-cost mortgage lending?

Are record-low interest rates masking high-cost mortgage lending?

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Weekly Refi Applications Plunge 7.2%

Total mortgage and refinance applications fell 3.5% in the week ending August 7 but are still up 16% from the year-ago level, according to a survey by the Mortgage Bankers Association (MBA). The volume of refinance applications alone slipped 7.2% from last week, bringing the refi share to 52.3% of total application activity from 54.2% a week earlier. The MBA, which also tracks average interest rates, noted mortgage rates rose across the board the same week. Thirty-year fixed mortgage rates jumped 21 bps, while 15-year fixed rates crept up 11 bps. The publisher of a separate application survey conducted by Mortgage Maxx, however, warns against drawing too bold a conclusion from the relation between weekly rates and refinance interest, as refi apps are still suppressed from recent highs. "The refinance option remains very fragile and disengaged from the current rate structure," says publisher Paul Descloux in the weekly commentary. "Given that such a large fraction of homeowners are now underwater, even successful [quantitative easing] may not produce the relief originally envisioned despite the vast allocation of resources." The Mortgage Maxx survey found an overall decline in household activity to match the drop in gross application volume. The Mortgage Application Index -- or MAX -- adjusts raw data to count multiple applications from the same household as a single applying party. The index saw a 0.9% decline in the week ending August 7, with household activity in California alone showing "distinct weakness," according to Descloux, after diving 6.4%. Write to Diana Golobay.

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