Reading Rates: MBA Application Survey – July 06 2011

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage jumped a whopping 23 basis points to 4.69% since last week while the purchase application volume increased 4.8% and the refinance application volume declined 9.2% over the same period.

Given that we are nearing at the end of the Feds QE2 intervention, it will be interesting to see how long rates trend in the next few months.

In any event, the purchase application volume remains near the lowest level seen in well over a decade while refinance activity continues to bounce around a bit.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

No Mercy

Oh Mercy… the Treasury is on the “loan modification” bandwagon again and in all likeliness the outcome of this program will be about as unsuccessful as prior attempts by the feds to stave off foreclosure for hundreds of thousands of ill suited "homeowners".

It’s important to recognize the impact that these programs are having on the nation’s housing markets, mucking up the market clearing process by gumming up the works with red tape, paper trails and needless lawsuits and expense.

It’s a near perfect example of the federal government’s exceptional ability to traumatize an entire market in the attempt to benefit a few participants who would be better off just left alone.

Many HAMP recipients report that they are furious with the banks and claim that they are being bullied around.

Yet… the fact remains that they needed modifications in order to stay in “their” homes so forgive me if I seem a bit callous to their plight.

All things being equal, recipients of mortgage modifications would have likely done better to face reality and recognize that they made a serious financial error with their housing “investment” and move on.

A brisk “creative destruction” phase is no doubt more beneficial to the overall market than the lengthy “uninspired construction” that the feds have whipped up.

Yet, the feds march on with failed policy after failed policy hoping that somehow their good intentions can erase the mistakes made by a generation of rubes and speculators but never fully recognizing that their actions net out to an utter loss for the system as a whole.

On The Stamp: Food Stamp Participation April 2011

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is continuing to rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that in April, an additional 60,586 new recipients were added to the food stamps program, an increase of 10.38% on a year-over-year basis, while household participation increased 12.70%.

Individual participation as a ratio of the overall civilian non-institutional population has increased 9.66% over the same period.

Participation continues to increase with nominal benefit costs climbing a lofty 10.38% on a year-over-year basis to $5.95 billion for the month.