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October 9th, 2013

Mortgage rates tick lower and refinancers respond

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3-Federal-ReserveRates on the most popular types of mortgages continued along a slight downward path according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages fell by four basis points (0.04 percent) to 4.34 percent. Conforming 5/1 Hybrid ARM rates decreased by six basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 3.21 percent.

Rate of decline has slowed

“Mortgage rates drifted lower this week, but the rate of decline has slowed,” said Keith Gumbinger, vice president of HSH.com. “The influence on mortgage rates from the Fed’s surprise inaction late last month is now behind us, and important economic signals such as the Employment Report have been interrupted by the government shutdown. Without clarity as to where we are or where we might go, investors are acting cautiously.”

Investors aren’t the only ones without a clear sense as to how to proceed. At least some mortgage shoppers are in a kind of document limbo, as the IRS is closed so is not responding to requests for tax return verifications, authorized by a document called the 4506-T.

Although Fannie Mae and Freddie Mac require a verification of filed tax returns, it is technically possible at some point that this requirement could be waived, or a waiver of liability could be offered to lenders originating loans without these verifications. However, this is unlikely to happen unless the housing market approaches a standstill.

Mortgage rates at early-summer lows

“Rates are lower than at any time since early summer, and borrowers are of course responding to them,” adds Gumbinger. “For the moment at least, lenders are happy to take applications but without needed verification of tax filings, loan closings may be delayed. The longer the shutdown persists, the more severe these delays will become.”

Shift in refinance, purchase applications

The current low-rate environment has prompted a bit of a shift in mortgage applications according to an industry trade group. The Mortgage Bankers Association reported Wednesday that overall applications decreased slightly from the week prior, but that refinance applications saw a meaningful increase.

While overall mortgage volume fell by 0.4 percent during the week ending October 4, refinance applications were up 3 percent while purchase applications fell by 6 percent. The volume of refinance applications increased to 63 percent of overall mortgage applications, hitting the highest level since August.

We know that refinancing homeowners continue to respond to mortgage rates, currently at early-summer lows, but it’s too soon to tell if the government shutdown is making purchase borrowers wary.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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