Rates continued to level off this week as the federal government stepped in to help mortgage companies concerned about the increasing number of borrowers who have stopped making payments.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average ticked up to 3.33% with an average 0.7 point. Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.
It was 3.31% a week ago and 4.2% a year ago.
Freddie Mac, the federally chartered mortgage investor, aggregates rates from 125 lenders across the country to come up with national average mortgage rates. It uses rates for borrowers with flawless credit scores. These rates are not available to every borrower.
The 15-year fixed-rate average rose to 2.86% with an average 0.7 point. It was 2.8% a week ago and 3.64% a year ago. The five-year adjustable rate average slipped to 3.28% with an average 0.3 point. It was 3.34% a week ago and 3.77% a year ago.
"While investors kept bond rates at historic levels under 1%, mortgage rates did not follow on a downward arc due to the fact that banks and lenders are pricing loans for the higher risk they are assuming by raising [credit] scores and down-payment requirements," said George Ratiu, senior economist at Realtor.com. "The Federal Housing Finance Agency – Freddie Mac and Fannie Mae's regulator – recognized the liquidity risk and moved this week to allow the enterprises to purchase mortgages which recently entered forbearance. This will provide a short-term backstop for some lenders, as it shifts the default risk to the government and should encourage banks to continue meeting buyer demand."
The Mortgage Bankers Association said this week that the number of mortgages in forbearance jumped to 6%. By comparison, less than 1% of loans were in forbearance in early March. When a loan goes into forbearance, payments are reduced or postponed but interest continues to accrue.
"Mortgage servicers continue to receive a very high level of forbearance requests, but volumes were down somewhat compared to the prior week," Mike Fratantoni, Mortgage Bankers Association chief economist, said in a statement. "Given that lockdowns and associated job losses will continue in the coming weeks, forbearance inquiries will likely rise again as we approach May payment due dates."
The Federal Housing Finance Agency announced this week that it will allow Fannie Mae and Freddie Mac to buy mortgages that go into forbearance. However, there are restrictions on which loans they will buy. They will only buy loans that go into forbearance after closing but before they are sold. The loans also can't be more than one-month delinquent. FHFA said this solution allows lenders to sell loans and preserve liquidity.