According to the Mortgage Bankers Association’s, mortgage applications rose 5.5% last week, with both purchase and refinance activity on the rise.
The index of applications to buy or refinance a loan rose to 657.4 from 622.9 the prior week, with the purchase index up 5.2% and its refinancing index up 6%.
Refinance applications made up 42.1% of the total, up from 41.4 percent the week prior.
Average rates fell across the board, with the 30-year fixed down to 6.25% from 6.42%, the lowest point in nearly four weeks.
The average rate on a one-year adjustable mortgage fell to t the prior week. The average rate on a 15-year fixed mortgage dropped to 5.90% from 6.10%, while the one year adjustable rate mortgage fell to 6.34% from 6.52%, the first decline in five weeks.
Mortgage applications are up, but it’s important to note that the survey only takes into account 50% of all U.S. retail residential loan origination, mainly from the larger banks and lenders.
“The survey overstates activity,” said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York. “We discount the MBA survey and continue to look for home sales to fall through next year.”
Larger banks and lenders are beginning to see a windfall as the smaller guys shut their doors, boosting numbers in the MBA surveys.
So when one lender closes, brokers scurry to submit loans elsewhere, falsely inflating mortgage application volume.
And with the market so shaky, many mortgage brokers and loan officers have been sending borrower’s loan applications to multiple lenders in the hopes that one will stick.
One final thing to point out, just because applications are up doesn’t mean more loans are actually funding.
As I wrote in a previous post, according to a survey conducted by Washington-based Campbell Communications, roughly 33% of home purchase closings originated by mortgage brokers in August were canceled, up from 4% in 2004.
Meanwhile a startling 57% of brokers’ customers found they were unable to refinance their adjustable rate mortgages.
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