Reaching their lowest level since early August, mortgage applications for home loan refinancings fell for a second straight week. With the absence of government support there was optimism for the housing market since there have been historically low mortgage rates but they have failed to find a footing for this ailing market.
Today, the Mortgage Bankers Association reported its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week of September 10th and recorded an 8.9 percent drop.
Furthermore, their seasonally adjusted index of refinancing applications alone dropped 10.8 percent which is its lowest level since the week of August 6th.
According to Torsten Slok, senior economist at Deutsche Bank in New York, one of the biggest problems for homeowners today is "underwater" mortgages where the amount that is owed on the mortgage exceeds the value of the home. As a result, this negative equity makes many homeowners unqualified for home loan refinancing and even prevents some from selling.
He continued by saying, "Even if mortgage rates got as low as 3 percent these people still would not be able to refinance."
Slok further stated that many borrowers have an incentive to refinance, but they may have lost their jobs or the closing costs are too high to allow them to do so.
"The housing market right now is an innocent bystander to the weak labor market and it may take years before many of those jobs come back," he said.