As businesses have shut down and unemployment rates have soared, fewer people are in the market for a new home or refinancing an existing mortgage. Additionally, many potential buyers have seen their financial circumstances change due to job loss, closed businesses, and reduced incomes, making it more difficult for them to obtain a loan.
The US Mortgage Market Index (MMI) compiled by the Mortgage Bankers Association (MBA) showed that mortgage applications have dropped significantly since the start of the pandemic. In March 2020, the MMI fell to 861.2 from 1112.4 in February. This was a 22.7 percent decrease in the number of applications. The index then dropped even further in April to 589.2. This was a 31.6 percent decrease from the previous month and the lowest level recorded since 1991.
Due to the low number of applications, lenders have had to adjust their loan origination policies. In particular, they have tightened their credit requirements, resulting in fewer approved loans for potential buyers. Lenders have also increased their interest rates, making it more expensive for borrowers to take out a loan for a home. Additionally, many lenders have reduced their fees and eliminated certain products and services, such as closing cost assistance and no-closing cost mortgages.
The lack of available housing inventory is also an issue. Many sellers are reluctant to put their homes on the market given the uncertain economic conditions. This leaves fewer homes available for purchase and makes it more difficult for potential buyers to find housing that meets their needs and budget.
The overall economic environment has had a significant impact on mortgage application activity. The volume of applications has dropped significantly since the start of the pandemic, and lenders have had to adjust their policies and practices to compensate. The lack of available housing inventory has also created additional challenges for potential buyers looking for a home.
The current economic situation has been challenging for all involved in the mortgage industry, and the outlook is uncertain. It is likely that mortgage application activity will remain suppressed until the economy begins to recover. However, if lenders continue to adjust their policies and fees to make loans more accessible to potential buyers, there may be an uptick in applications over time. It remains to be seen whether this will be enough to offset the economic disruption caused by the pandemic.
The global pandemic has caused immense disruption to the economy, and the mortgage industry is one sector that has been particularly hard hit. Mortgage application activity in the United States has decreased drastically since the start of the outbreak due to changes in employment and financial circumstances making it much harder to obtain a loan. The US Mortgage Market Index, compiled by the Mortgage Bankers Association, reported a 22.7% decrease in applications in March 2020 and a 31.6% decrease in April.
Lenders have had to adjust their loan origination policies to cope with the lower levels of mortgage applications. Credit requirements have been tightened, resulting in fewer approved loans and increased interest rates making it more expensive for borrowers to take out a loan for a home. Fees have been reduced and certain products and services, such as closing cost assistance and no-closing cost mortgages, have been eliminated.
The lack of available housing inventory is also a major factor in reduced application activity. With many sellers unwilling to list their homes due to the uncertain economic conditions, potential buyers are left with fewer options to choose from.
Overall, the current economic situation has presented many challenges for those involved in the mortgage industry and the outlook is uncertain. It is likely that application activity will remain suppressed until the economy starts to recover. However, if lenders adjust their policies and fees to make loans more accessible, there may be an uptick in applications over time. Whether this will be enough to compensate for the economic disruption caused by the pandemic remains to be seen.
This article was contributed on Nov 12, 2023