RJ and Makay

With mortgage rates at their lowest since the end of January, mortgage applications were up last week as borrowers looked to refinance. The Mortgage Bankers Association (MBA) index of loan applications rose 13% in the week ended February 18 after dropping the prior week to its lowest point since November 2008. Meanwhile, the association's refinancing measure jumped 18% and its purchase gauge rose 5.1%.

“Refinancing is more sensitive [than purchases] to fluctuations in rates,” observes Paul Dales, a senior economist at Capital Economics Ltd. However, Dales says he expects refinancing to remain soft, with sales at historically depressed levels, for two or three years.

Most U.S. financial institutions expect their consumer lending businesses to grow or at least remain steady in 2011, a survey of more than 1,000 banking professionals shows. However, a soft economy and new regulations could hinder the lending business, say these professionals, who were polled in January by Wolters Kluwer Financial Services.

Of the survey respondents, 79% said their institution’s consumer loan volume would rise or stay the same this year. Only 5% predicted a decline and 16% weren’t sure. Institutions with more than $250 million in assets were most likely to anticipate increased loan volume. Respondents cited the following factors as potential hindrances to consumer lending in 2011: a soft economy (30%), stricter compliance regulations (24%), reduced loan demand (18%), and increased competition (17%).

Fewer U.S. homes entered the foreclosure process in January than in any month in more than three years, reports foreclosure listing firm RealtyTrac.

Indeed, the number of homes receiving an initial default notice in January fell 1% since December and plunged 27% since January 2010. Scheduled foreclosure auctions have also sharply decreased, falling to their lowest level in two years, RealtyTrac says.