Mortgage applications increasing, survey says

The MBA survey’s numbers may be misleading, however.

MCCLATCHY NEWSPAPERS

CHICAGO — The volume of mortgage applications increased at a seasonally adjusted 3.4 percent last week compared to the prior week, according to the Mortgage Bankers Association’s weekly survey.

Applications were up 20.6 percent last week, compared with the same week in 2006, according to the survey.

However, this uptick may be misleading: The industry group’s chief economist said “recent upheavals” that have hit the mortgage industry may be contributing to that boost.

In particular, the industry’s turmoil “may be temporarily increasing the level of retail application activity at the large lenders that participate in the MBA survey rather than representing a systemwide increase,” said Doug Duncan, the MBA’s chief economist and senior vice president of research and business development, in a news release.

“Look at a firm like American Home Mortgage, that had not been in the survey,” said Jay Brinkmann, vice president of research and economics for the MBA, in a telephone interview. “With them shutting their doors, you suddenly had every person in their pipeline who hadn’t closed having to refile.”

Shifting business

That, along with other disruptions in the prime mortgage market, may have shifted additional business into firms included in the survey, he said.

“It’s not, in a sense, new business. It’s people having to seek out suddenly another mortgage lender to get their sales closed,” Brinkmann added.

A note released Wednesday from Lehman Brothers, regarding the survey, also pointed out that the rise in applications contrasts with recent reports of the contraction in mortgage originations and tighter lending standards.

“This lends to the argument that the MBA survey overstates activity since the survey only includes retail lenders, which have likely witnessed an increase in activity as borrowers turn away from wholesale brokers,” the note read.

“Most of the reduction in lending has been on the wholesale side, which had a bigger hand in the origination of risky loans. As such we do not put much weight on purchase applications as an indicator of future home sales.”

The volume of loan applications to refinance a home was up 2.6 percent last week over the previous week, according to the survey. The volume of purchase loan applications was up a seasonally adjusted 3.9 percent.

The four-week moving average for all mortgage applications was up a seasonally adjusted 1.9 percent.

Meanwhile, the refinance share of mortgage activity stayed at 39.9 percent of all applications, unchanged from the previous week. The adjustable-rate mortgage share was 21.0 percent, down from 22.5 percent of total applications the week before.

As application volume ticked up, so did mortgage interest rates, according to the survey.

The 30-year fixed-rate mortgage averaged 6.45 percent last week, up from 6.41 percent the week before, while the 15-year fixed-rate mortgage averaged 6.19 percent last week, up from 6.16 percent the week before.