The Mortgage Bankers Association reported today that applications for home loans notched a massive decline last week. The industry group's market composite index plummeted by 13.5% compared to the previous seven-day period. This marks the eighth time in 10 weeks the index has headed lower. At the present level, it's off its May high by 58.7%.

There's little question that higher mortgage rates are to blame for the overall downward trend. Since the first week of May, the average rate on a conforming 30-year fixed-rate mortgage has skyrocketed, going from 3.35% all the way up to 4.57% today. The magnitude and speed of the advance have been unprecedented.

Applications to refinance existing mortgages have been the hardest hit by the hike in rates. But even with this in mind, last week was still an anomaly, falling by a staggering 20% on a seasonally adjusted basis. Over the last four months, they're off by 70%. And over the same time period, they've gone from a 76% share of overall mortgage application activity down to 57%.

Meanwhile, applications to purchase a home haven't been hit as hard. The MBA's purchase index decreased last week by 3%. More disappointing, however, is the fact that purchase-money mortgage applications are now down on a year-over-year basis. It's the first time this has been the case since the end of 2012.

The impact of this has already begun to reverberate through the mortgage market. Wells Fargo (NYSE:WFC), the nation's largest mortgage originator, recently said it's laying off 2,300 employees in its mortgage department, JPMorgan Chase (NYSE:JPM) acknowledged earlier this week that it expects to lose money in its mortgage originations business in the latter half of the year, and Bank of America (NYSE:BAC) is letting 2,100 employees go from the same department.

All three banks have also felt the impact on their balance sheets last quarter, notching declines in the accumulated comprehensive incomes of $3.4 billion, $3.4 billion, and $4.2 billion, respectively.

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