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The mortgage industry turned from feast to famine faster than America’s largest home lender anticipated, the Wall Street Journal reported. Rocket Mortgage harnessed a generation of low rates to refinance millions of homeowners. Last year, it racked up more than double the refi volume of any other lender, accounting for more than $1 of every $10 lent out during a boom for the mortgage industry. Now the Federal Reserve’s efforts to fight inflation have sent mortgage rates soaring. And refinancing, the driver of Rocket’s business, no longer makes sense for many homeowners. With mortgage rates now above 7%, just 133,000 U.S. homeowners can save money by refinancing at today’s rates, down from a peak of over 19 million in late 2020, according to Black Knight Inc., a mortgage technology and data provider. Refinancing accounted for some 82% of the total dollar volume of Rocket’s loans last year, according to Inside Mortgage Finance, an industry research firm. Rocket has switched its focus, selling mortgages on new purchases and pitching customers on refinancing packages that allow them to pull cash out of their homes. It is also trying to get smaller — shrinking its ranks through a mix of buyouts and attrition, rather than the layoffs that have become commonplace at its competitors.

Sales of new U.S. single-family homes dropped in September and data for the prior month was revised lower, more evidence that higher mortgage rates are choking the housing market, Bloomberg News reported. New home sales decreased 10.9% to a seasonally adjusted annual rate of 603,000 units last month, the Commerce Department said on Wednesday. August's sales pace was revised down to 677,000 units from the previously reported 685,000 units. Sales tumbled 20.2% in the densely populated South and fell 0.7% in the West. But they rose 4.3% in the Midwest and surged 56.0% in the Northeast. Economists polled by Reuters had forecast new home sales, which account for about 10% of U.S. home sales, declining to a rate of 585,000 units. Sales plummeted 17.6% on a year-on-year basis in September. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006. Data yesterday showed home prices logged their second straight monthly decline in August, resulting in a considerable slowdown in the annual pace of increase in house prices. Sales of previously owned homes fell for an eighth straight month in September, while homebuilding dropped, reports showed last week.

The average interest rate on the most popular U.S. home loan rose to its highest level since 2001 as tightening financial conditions weigh on the housing sector, data from the Mortgage Bankers Association (MBA) showed yesterday, Reuters reported. The average contract rate on a 30-year fixed-rate mortgage rose by 22 basis points to 7.16% for the week ended Oct. 21 while the MBA's Market Composite Index, a measure of mortgage loan application volume, fell 1.7% from a week earlier. Mortgage application activity is at its slowest pace since 1997. Mortgage rates have more than doubled since the beginning of the year, as the Federal Reserve pursues an aggressive path of interest rate hikes to rein in stubbornly high inflation. The central bank is expected to raise rates by 75 basis points for a fourth straight time at the conclusion of its next policy meeting on Nov. 1-2.

The Federal Housing Finance Agency said Monday that it will require lenders that use credit scores for mortgage underwriting to use scores from both Fair Isaac Corp., the creator of FICO credit scores, and its competitor VantageScore Solutions LLC, the Wall Street Journal reported. Until now, mortgage lenders had to gauge most borrowers using only FICO scores if they wanted to sell a loan to Fannie Mae or Freddie Mac. That requirement helped cement FICO’s dominant position as the go-to credit score for lenders for a variety of loans. Since lenders had to use FICO scores for many mortgages, they also made them the favored third-party credit score when underwriting car loans, credit cards and other consumer loans. This also helped secure FICO scores as the main credit score used in the securitization market. The FHFA, Fannie Mae and Freddie Mac began a review of whether to change credit score requirements in 2014. Consumer advocates, VantageScore and some mortgage lenders had pushed for the change, saying that it would allow more people to get approved for mortgages. The FHFA said in a statement that it expects that the change “will be a multiyear effort.”

New U.S. home construction declined in September and permit applications for single-family dwellings fell, adding to evidence that the highest mortgage rates in two decades are sapping demand and discouraging new builds, Bloomberg News reported. Residential starts decreased 8.1% last month to a 1.44 million annualized rate, according to government data released Wednesday. Single-family homebuilding dropped to an annualized 892,000 rate, the slowest since May 2020. Construction of multifamily dwellings also declined. Applications to build, a proxy for future construction, rose to an annualized 1.56 million units, led by multifamily properties. Permits for construction of one-family homes fell 3.1% to a more than two-year low of 872,000 in September. The housing market is bearing the brunt of the Federal Reserve’s interest-rate hikes as they aim to free the economy of stubborn inflation. The real estate sector is especially susceptible to rising borrowing costs, and the Fed is projected to push ahead with another 75 basis-point increase in early November.

Mortgage rates reached a 20-year high last week as the U.S. housing market continued its rapid slowdown, according to data released today by the Mortgage Bankers Association (MBA), The Hill reported. The 30-year fixed rate climbed to 6.94 percent in the second week of October, up from 6.81 percent a week earlier, marking the highest 30-year rate since 2002. MBA’s Weekly Mortgage Applications Survey showed an overall decrease in mortgage applications, including a dropoff in refinancing. The share of refinance applications fell to 28.3 percent of total applications. “The speed and level to which rates have climbed this year have greatly reduced refinance activity and exacerbated existing affordability challenges in the purchase market,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. Meanwhile, the share of adjustable-rate mortgage (ARM) applications reached the highest level since 2008, rising to 12.8 percent of mortgage applications.