NEW YORK -- U.S. mortgage applications rose to a three-month peak last week, driven by a rush to buy or refinance homes before lenders clamp down harder and approve fewer loans, analysts and a trade group said on Wednesday.
"This is a market that is still groping for the bottom," said Greg McBride, senior financial analyst at Bankrate Inc. in North Palm Beach, Florida.
The Mortgage Bankers Association's seasonally adjusted mortgage application index rose 3.4 percent in the week ended Aug. 10 to 678.7, its highest level since the middle of May.
The rising applications seem to fly in the face of a spate of reports pointing to a crisis of confidence in the mortgage industry.
Potential borrowers may be filing multiple applications as more mortgages are rejected, probably distorting the total applications figures, analysts have said.
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"Recent upheavals in the mortgage industry may be temporarily increasing the level of retail application activity at the large lenders that participate in the MBA survey rather than representing a system-wide increase," Doug Duncan, the MBA's chief economist, said in a statement.
The MBA says its mortgage application survey covers about half of all U.S. retail residential mortgage originations.
"Everyone is concerned about risks" tied to the easy money loans of the past few years, McBride said. "Borrowers with poor credit, borrowers that didn't document income and borrowers that purchased a home at the peak in the market with no money down" are now sending shockwaves through the economy as more of their loans start failing.
LENDERS SHUT DOORS
The rapidly rising defaults and foreclosures that have shaken the subprime mortgage market have been seeping into higher-quality loans.
Dozens of mortgage lenders have shut their doors and most others have tightened lending standards.
"The bad news in subprime isn't over. We'll get more of that," McBride added. "If you ride a bicycle with a blindfold on, sooner or later you're going to wipe out."
Foreclosures and late payments on home loans serviced by Countrywide Financial Corp. (CFC.N), the largest U.S. mortgage lender, rose in July to their highest in at least five years. The company on Tuesday said it made 14 percent fewer home loans last month than in June after tightening its lending standards.
On the refinancing side, borrowers continue to take advantage of relatively low loan rates — especially homeowners with adjustable-rate mortgages who opt to switch into fixed-rate mortgages.
Borrowing costs rose across the board last week, with 30-year loan rates up 0.04 percentage point to 6.45 percent excluding fees. These loans were slightly less expensive compared with the year-ago rate of 6.54 percent, the MBA said.
One-year adjustable-rate mortgage rates increased to 5.81 percent from 5.69 percent.
The MBA's overall mortgage application index includes the purchase and refinance subcomponent indexes.
The MBA's purchase index rose 3.9 percent to 464.9 for the week ending Aug. 10. The refinancing gauge climbed 2.6 percent to 1,929.6 on a seasonally adjusted basis in the same week.
In a separate report on Wednesday, the National Association of Realtors said the pace of home sales fell in 41 states and the median price of existing homes sank 1.5 percent to $223,800 in the second quarter from a year earlier.
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