Fannie Mae aims to track refinance activity and refinance application trends through its newly launched Refinance Application-Level Index (RALI).
The RALI, which sources data from Fannie Mae’s Desktop Underwriter to show the past week’s refinance application trends and prepayment projections, will publish each Tuesday at 10 a.m. EST, according to Fannie Mae.
Fannie Mae’s new index provides two measures: volume of unpaid principal balance in dollars and a loan count.
For the week ending June 10, the dollar volume of refinance applications rose 17.9% from the previous week. RALI dollar volume was down 69.5% compared to the same week last year. RALI’s loan count climbed 16.2% week over week. Compared with the same week last year, the loan count is down 68.6%.
“Forecasting refinance originations and prepayments has become more challenging in the past two years, as the observed relationship between refinance incentive and prepayments has evolved,” said Devang Doshi, Fannie Mae’s senior vice president of single-family capital markets.
“The RALI has been a strong leading indicator for prepayment activities, and we believe the additional transparency it brings industry participants will improve prepayment modeling performance.”
3 questions lenders should ask before implementing non-QM
With refinance volumes anticipated to decrease by 62% this year and many originators experiencing layoffs, lenders are looking for a way to diversify their offerings with non-QM products and gain new business in order to maintain profits.
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The mortgage industry is coming off a refi boom in which conventional 30-year fixed mortgage rates hovered around 3%. But as rates spiked, breaking the 5% mark in April, it left fewer people with an incentive to refinance. Last week, purchase mortgage rates jumped to 5.23% after falling marginally for three consecutive weeks.
Another tool to track refinance activity is the Mortgage Bankers Association’s weekly Market Composite Index (MCI), which measures mortgage application volume. The MCI dropped 6.5% for the week ending June 3, partially due to the decline in refinance applications. The refinance index dropped 6% from the previous week and was 75% lower than the same week a year ago.
While rates were lower than four weeks ago, it wasn’t low enough to spur refinancing activity, said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Originations of refi loans fell 15% to $424 billion in the first quarter, according to the Federal Reserve Bank of New York‘s quarterly report on consumer debt and credit. Compared to the first quarter of 2021, refi loan originations are down 40%.