Housing Drags on Rising RatesFollowing Tuesday's fear over the buildup to possible military action against the government of Syria by the United States and its traditional allies, financial names were stalled by mediocre housing data, declining refinance applications and an inventory shortage in several major markets. The Mortgage Bankers Association on Wednesday said its Market Composite Index for the week ended Aug. 23 was down 2.5% from the previous week. The Market Composite index measures total residential loan application volume. The MBA's Refinance index was down 5% from the previous week, and was down over 64% from its peak early in May. The average rate for a conforming 30-year fixed-rate mortgage loan during the week ended Aug. 23 was 4.8%, rising sharply from 4.7% the previous week. A "conforming" mortgage loan is one that meets the basic underwriting of Fannie Mae and Freddie Mac, with a loan-to-value ratio of 80% or lower, and a principal balance of $417,000 or less. Rates on conforming mortgage loans hit their highest level since April 2011.
More Skin in the GameIn industry news on Wednesday, the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and other federal agencies proposed that aside from "qualified residential mortgage loans," or QRM, mortgage loan securitizers should be required to retain 5% of the credit risk of the loans the sell through securitizations. The rules are subject to a 60-day comment period, but as we have seen with so many rules proposed to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, it may take much longer for the final rule to be set.
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