Could the increase in apps be due to buyers applying to new lenders cause their old lender closed?

Asked by Jim Walker, Carmichael, CA Sat Aug 11, 2007

reports of a turn around in mortgage demand and analysis by a Wachovia analyst think that signs are pointing to the market rebounding to a greater or lesser extent.

The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan jumped 8.1 percent to 656.5 from 607.1 the prior week. A gauge of demand for credit for home purchases rose 7.4 percent, and the average rate on a 30-year fixed mortgage fell for the fourth consecutive week, the group said today.
A resilient labor market and lower home prices may support sales and eventually help reduce the glut of unsold properties, economists said. A report last week showed Americans signed more contracts to buy previously owned homes in June, a sign the weakness in the housing market may not get much worse.
“We’re at the bottom right now in housing,” said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina. “The biggest declines are over

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Paul Slaybau…, Agent, Scottsdale, AZ
Sat Aug 11, 2007
BEST ANSWER
What a terrific question, Jim! That is a perspective I honestly hadn't yet considered. I have clients scheduled for closing on a new build at the beginning of September. They were financing through the "preferred lender," which was American Home Mortgage. After AHM went belly up, you guessed it ... new application to another institution. Just goes to show that surface data, whether spun positively or negatively, is not always to be trusted as a true indicator of market health. Thanks for the reminder.
1 vote
George Anton…, Agent, Madison, CT
Sat Aug 11, 2007
From what I've been told by our area lenders, a lot has to do with the attempt to refinance away from the variable rate loans that so many buyers got locked into. I would like to know what percentages go to refinancing.
4 votes
Ellen Chung, , San Mateo, CA
Sun Aug 12, 2007
There have actually been a few articles regarding this perspective about rising mortgage application statistics, one of the articles' links is below. I can't find the article that is completely focused on the analysis behind the statistics, but the article below is somewhat similar but on a more superficial scale. I think the possibility of the same pool of borrowers reapplying with new brokers/lenders/banks inflating the "true" amount of mortgage applications is extremely high. Especially because borrowers now are still not yet believing that the entire mortgage market could have changed so dramatically over a few months--that guidelines are so much stricter, interest rates are slightly higher, loan programs are so much fewer.

I wish I could believe that the real estate industry and mortgage market are making a positive turn but perhaps there is hope! With an increase in pending sales, this data could just mean that we're looking at a brighter coming month. However, I do think that there are more borrowers attempting to refinance out of their ARMs and other riskier mortgage terms but I think the fact that borrowers are reapplying for loans has been influencing the statistics. Great observation Jim!
2 votes
Roberta Murp…, Agent, Carlsbad, CA
Sun Aug 12, 2007
Jim: I think there might be several factors at play, including:

1. Applicants with failed lenders move elsewhere and create a new loan application.
2. ARM loans are being refinanced into more stable products.
3. Buyers are starting to return to the real estate marketplace. There are too many bargains to ignore.
1 vote
The Hagley G…, Agent, Pleasanton, CA
Sat Aug 11, 2007
I like Carrie's thinking....good news is good news! I also wonder if it has anything to do with the media's coverage of tightening mortgage standards...maybe buyers are trying to make it under the wire before things get any stricter?
Web Reference:  http://www.cindihagley.com
1 vote
Carrie Crowe…, Agent, Southaven, MS
Sat Aug 11, 2007
Well Jim, that could have something to do with it. It could also be that there are more buyers taking advantage of the buyers market and making some good real estate deals. Also, with the increase in foreclosures, there may be many amatuers getting into investment property at a good deal! At anyrate, it seems to be good news!
Web Reference:  http://carriecrowell.com
1 vote
Jim Walker, Agent, Carmichael, CA
Sun Aug 12, 2007
Matthew, it wasn't meant to be a personal attack. It was a criticism of your post. My assessment of your personality in my post was that I thought you were a rosy optimist. - And that I found that trait admirable.

The part of my personality that is on display in Trulia voices is my writing personality, which is just a slice of my true personality. My writng personality is unguarded, I express my opinions forcefully here, in order to stir things up and get people to think., and to encourage people to make their own posts interesting reading.

I was tough on Matthew for misreading my question. I thought that he changed the meaning of my question on purpose to deflect the thread away from my hypothesis and into an irrelevant fact. I realized that due to spacing limitations imposed by Trulia on the character length of the question, that I could not post it as I had wished, which would have been : "Could the increase in mortgage applications be due to buyers applying to new lenders because the lender that they had previously applied to had closed or stopped making new loans?"

Because of his indignation at my criticism, I must allow that he accidentally rather than purposely reinterpreted the word 'buyers" in my question to read "debtors" Even though he made an innocent mistake, I had the right to point it out. I am sorry that Matthew's feelings were hurt. I am happy for him that applications on his desk are up.
0 votes
Matthew J Bl…, , 33410
Sun Aug 12, 2007
Taken personal attacks on myself shows what type of true personality you must really have. This is one of the many reason why I clearly state that I am a full time mortage professional. I do not wear to hats as many people try to do in the industry. I do know my applications are up. However, with the tighten of the industry guidelines it is tougher to close loans. Is this a bad thing? We are just in a stage of going back to common sense. You have money, credit you will still be buying a home.
0 votes
Jim Walker, Agent, Carmichael, CA
Sun Aug 12, 2007
Matthew J B, your answer is irrelevant to my posted comment / question.
Everyone else realized that I was speaking of loans in process, not loans in servicing. The number of spaces available in the question format do not allow for exhaustive explanations of what each word in the question means.

If you believe that the 8% jump has nothing to do with APPLICATIONS stranded on closed lenders desks, then explain why not. Being the rosy optimist singing RAH-Rah, is admirable, but changing the context of my question is not.
0 votes
Matthew J Bl…, , 33410
Sun Aug 12, 2007
I think the most important thing to remember is that just because a lender went out of business does not mean the note becomes due or the borrowers do not have to pay back the loan. I do not believe the 8% jump was because of this. I see with the amount of properties available and the sellers bending over backwards to help the buyers out and may reason for the spike. In addition we still have Billions of dollars in Adjustable Rate Mortgage's coming do.
0 votes
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