Mortgage applications have declined to lows not seen since late 2000, before the housing boom started, according to a report Wednesday from the Mortgage Bankers Association.
“We are struggling with a supply issue right now. If the investor money is not coming to us, we can’t invent new dollars to lend,” said Chris Holbert, executive director of the Colorado Mortgage Lenders Association.
The MBA publishes a weekly index that tracks mortgage applications for refinances and purchases.
As of Friday, the overall national index was down 37.2 percent from the same week last year.
The national purchase index is down 32.2 percent in the past year, while the national refinancing index is off 44.3 percent.
Although state-level data aren’t available, local mortgage experts said Colorado hasn’t escaped the national trend.
Rising interest rates, fewer mortgage products and tighter lending standards are all contributing to a sharp downturn in applications.
And there is less money to go around. At the peak in 2003, mortgage lending reached $3.8 trillion. Last year, it was $1.8 trillion, Holbert said.
A bump up in interest rates in recent weeks has made refinancing less attractive and pushed some nontraditional loans such as jumbo mortgages above 8 percent.
Since late April, the mortgage-application index has declined sharply. It now stands at levels last seen in December 2000.
But why didn’t application activity decline sooner, given that the credit crunch started last summer?
When credit markets first tightened, borrowers filed multiple applications in hopes of winning approval, said Steven Wood, an economist with Insight Economics.
Borrowers, when they could, rushed from adjustable-rate to fixed-rate loans. Fed rate cuts that caused mortgage rates to temporarily drop resulted in application surges in January and March.
But the index measures applications, not successful applications, and a certain fatigue has set in, said Lou Barnes, owner of Boulder West Financial Services.
Lenders, after repeatedly seeing applications fail, are more inclined to warn off borrowers who can’t qualify.
“Industry people aren’t going to take applications for loans that aren’t going anywhere. They are going to screen callers at the pre-application,” he said.
Falling home values have left homeowners who borrowed or refinanced in recent years unable to escape their existing mortgages, eliminating a large pool of potential borrowers, said Jim Smith, a loan officer with American Guaranty Mortgage in Denver.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
