The reason behind the inconsistency in the number of mortgage applications that is released to the public Paul Jackson of Housewire.com explained the reason behind the differing results of two mortgage companies’ application data in a recent article. Last November 19, the Mortgage Bankers’ Association (MBA) released a statement that the level of mortgage applications for the week ended November 14 dipped further to 6.2 percent despite lower rates that could have enticed more borrowers to take that needed loan. On the other hand, Mortgage Maxx LLC reports that its index shows a 0.1 percent spike, making the level of applications flat contrary to the MBA’s findings. Could it be because of the seasonal adjustments that the MBA employs to its data? Not really. The voluminous paperwork involved in a common mortgage application is much harder to figure out. According to Jackson, two things can be attributed. First, Maxx eliminates the multiple counting of several applications for the same address while the MBA does not. Second, the MBA differentiates new applications from refinance requests while the other doesn’t. Jackson quotes one analyst, Variation (in) the sampling mix of refinancing and purchase apps, however, could lead to the two indices to yield different results.
Maxx claims in their website that “once a mortgage application occurs, duplicate applications for the same property are prevented, reducing a potential source of distortion when measuring mortgage activity during rapidly falling interest rates.” If so, how come it still has more applications than that of the MBA in the said period?
On the other hand, the MBA claims that their respondents include mortgage bankers, commercial banks and thrifts. You should keep in mind that they do not include wholesale brokers who are more easily affected by economic downturns and reduce the volume of their transactions. These are significant numbers that are left out in the company’s 18-year old survey. So which is more credible? It would actually depend on the purpose by which you will utilize the trend and numbers. If your purpose is to use seasonally adjusted statistics that will reveal aggregate mortgage application trends without reference to reapplications or if you want to track down only applications (without refinancing), we suggest that you choose the MBA’s data. However, if you want more accuracy and better forward demand forecasting, opt for Maxx’s numbers. They not only avoid overstating through multiple counting but also reflect more precise trends.
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