As we continue with the aftermath of the government shutdown, one thing that seems puzzling is a decline in mortgage applications following a decline in rates.

The latest figures are as follows: mortgage applications in the US saw a 0.6% drop, and home refinancing applications saw a 1% drop. It is interesting to note that new home purchase applications increased by 1% despite the aforementioned declines. 30-year fixed-rate mortgage interest rates saw a dip as well, declining to 4.39% from 4.46%.

The government shutdown affected the issuance of mortgages to new customers. The shutdown caused the suspension of the USDA mortgage program. Some lending was unaffected, however, lenders say delays occurred with scenarios involving FHA loans.

With mortgage rates rising since the start of summer, refinances have gone down. Refinances are down 57% from this time last year. Refinancing covers 65% of all loan applications.

Home sales took a decline in September, shifting away from the highs seen in previous summer months. Unusually, all-cash sales have seen a dramatic rise reaching a high of 33% of sales on the market.

Banks are also being affected by a dip in mortgage applications, too. Banks including JPMorgan Chase are issuing firings and condensing teams because it is now more expensive for banks to take on loans. According to National Mortgage News, loan origination costs are projected to rise 11% this year from last year. The rise in cost to issue loans is because of new rules and regulations issued by such agencies as the Consumer Financial Protection Bureau, the FHA, Fannie Mae and Freddie Mac. These changes will take effect in January 2014, but lenders including banks are seeing these changes affect them presently.

Despite this, there are now fewer delinquent loans. According to Lender Processing Services, delinquencies are currently down 12.63% from this time last year. Additionally, foreclosure process loans have declined 32% from last years figure.

Source: CNBC