The mortgage app ratio was >50% refis until very recently. No one is going to swap out their 2.75% for 5%, so naturally refis bottomed out. Note also that preapprovals aren’t included in “mortgage applications,” a buyer needs to go into escrow for it to count(1). So the large preapproved buyer BACKLOG is invisible here. To apply for a refi, you just need to own a house and have a pulse.
Application just means starting the process. On the back end of the refis specifically, getting to closing, the people refinancing NOW seem to be the same folks having a hard time getting to the closing table. Perhaps less than perfect judgement in one area (when to refi) is correlated with less than perfect judgement in other areas (“do I cosign my friend’s $800/mo car loan?”) which leads to lower average qualification probability.
(1) This is partially engineered. The RESPA definition of “mortgage application” requires certain things, one of which is the property address. And the only document any mortgage professional is interesting in reading a “property address” off of is a fully ratified, seller signed, purchase contract. So if there’s no accepted offer, it’ll never be coded as a “mortgage application” in any of the numbers visible to number crunchers. My new hire actually noticed that when a preapproved buyer says “I’m thinking of putting an offer in on a house, but I have some last minute questions, do you want the property address?” my answer is nearly always “no I do not want the address, but what are your questions?” and questioned me on it – it’s been so long since I’ve thought about it, that I forgot that I do it, until new hire questioned me.
