The Mortgage Bankers Association reported today that the level of new loan applications rose during the latest week. But a group of investment banking economists say the report exaggerates mortgage market activity.
Loan originators completed 6 percent more 1003 applications during the week ending Sept. 7 than in the prior week, MBA said in its weekly survey. Loan activity was 17 percent lower than a year earlier.
Purchase applications were 5 percent higher than the prior week, according to the trade group.
But economists at UBS Investment Research called the activity "exaggerated" in its U.S. Daily Economic Comment yesterday. UBS noted the latest four-week average of purchase applications was 8 percent higher than the fourth quarter average.
"We believe the exaggerated strength in applications reflects tightening in lending standards, with more applicants being rejected and reapplying," according to the newsletter authored by economists Maury N. Harris, James O'Sullivan, Samuel D. Coffin, Kevin Cummins and Karen Narang.
Furthermore, subprime lenders -- many who have either cut back originations or gone out of business -- were likely underrepresented in the sample for the report, UBS said.
"With lending standards being tightened in response to subprime mortgage problems, more weakness in sales than in mortgage applications purchase index seems credible," the report stated.