Mortgage Finance Index: There's More Than the CNBC Headline

CNBC reported this morning that the Mortgage Bankers applications index jumped 3.9% last week.  On the surface this looks healthy.  If you bother to go to the MBA website and read their actual press release - CNBC and Bloomberg don't typically bother with this, especially if the details belie the headline - you'll find that the purchase applications actually dropped 9.5%.  The increase in the index was from refi applications, which jumped nearly 15% as interest rates dropped last week.  Here's the link:  MBA Finance Index.

The housing market is about to take another cliff-dive, as home buyer tax credit expired on April 30, foreclosures and bank owned housing inventory spike and the "jingle mail" phenomenon - where underwater homeowners hand the house over the bank - becomes more pervasive.  I saw a statistic last night which reported that 23% of all homeowners are now underwater.

While not many actually believe the Government reports and White House smoke-blowing about a recovering economy and improving job market, it's difficult to hide the decaying housing market, especially when "for sale" and "for rent" signs continue to proliferate on a daily basis.  The big banks have marked most of their unsaleable credit paper up to fantasy.  As the underlying asset base - housing and commercial real estate - continues to decline in value, expect that either the Fed will engage in a massive QE2 program or we'll have another big credit market accident later this year.