Mortgage Applications Drop yet Again

The mortgage crisis seems to be persisting unabated. Now it looks like the volume of applications is still sliding. Last week showed the weakest level ever in five months with the Mortgage Banker Association's (MBA) adjusted index of mortgage applications falling 0.3 percent in the week ending July 27 to 607.1. This is barely above the February 16 week reading of 606.6. I see it as just the tip of the iceberg for the mortgage industry.

With home foreclosure filings up 58 percent in the first half of the year; the housing market isn't going to pick up any steam soon. These filings could surpass 2 million this year. Many overextended borrowers and investors from the boom years are now not able to keep up with their payments.

It is undeniable that people are hesitant to purchase big ticket items in a slow economy of increasing interest rates. There have been slight fluctuations in mortgage interest rates for home loan mortgages, but pretty much adjustable rate mortgage loan borrowers have been affected the most. They are either refinancing to fixed home loan mortgages or they have had their property go into foreclosure.

I don't see based on these numbers how home buying is going to pick up. If you just look around where you live or on your way to work, it's hard to keep up with the ever-growing home for sale signs.

Also, the rising subprime mortgage fallout is having residual effects, one of which is that mortgage lenders and mortgage brokers are going out of business. This week American Home Mortgage, a large national mortgage lender announced that it may not be able to fund current inventory of home loans in excess of $ 300 million dollars, sending its stock value plummeting by 90 %. But the subprime mortgage disaster is enveloping even prime loan lenders and borrowers.

Even the nation's largest mortgage lender, Countrywide Financial can't escape the fallout. Its second quarter profits dropped leading to a fall in share prices to a 52 week low on July 24. Its second-quarter net income dropped to $485.1 million from $722.2 million, a year ago with revenue falling 15% to $2.55 billion. Countrywide Financial stated the drop in revenue was due to delinquencies from prime home loan borrowers of second mortgages including home equity loans and home equity lines of credit.

Unlike in the old days of our parents, when a second mortgage was taken out only in time of emergencies or economic distress, now many people with good credit are simply getting home equity loans and home equity lines of credit to fund their lifestyles. I just don't see a rebound in this depressed housing market anytime soon.