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MBA Launches New Survey to Track Mortgage App Trends

Robert Ottone
Jul 11, 2013

The Mortgage Bankers Association (MBA) has released its new Builder Application Survey (BAS) that captures mortgage loan application activity on new single-family properties for lenders affiliated with home builders on a monthly basis. The BAS will track application volume from mortgage subsidiaries of large home builders across the country. Utilizing these data, as well as data from other sources, MBA will be able to provide an early estimate of new home sales volumes. This data also provides information regarding the types of loans used by new homebuyers. The sales estimates reported by the Census Bureau on a monthly basis are based on new home sales as recorded at contract signing. Since the mortgage application is typically made around the same time the sales contract is signed, capturing the number of mortgage applications will give an indication of new home sales. “MBA’s new Builder Application Survey is entirely focused on the new home market. MBA’s Weekly Application Survey, which has been in existence for 23 years, includes a measure of purchase application volume," said Mike Fratantoni, MBA’s vice president of research and economics. "However, with existing home purchases currently running at ten times the level of new home purchases, the purchase index reported every week is more closely correlated to trends in existing home sales and those sales are reported when the deals are closed, often 45 days or more after the initial contract signing and mortgage application. In contrast, the Census Bureau’s estimate of new home sales is based on initial contract signings, which most often occur around the same time as the mortgage application. This is why we believe the new Builder Application Survey should track closely with, and predict, new home sales." MBA’s Builder Application Survey data for June 2013 shows that mortgage applications for new home purchases decreased by 15 percent relative to the previous month. This change does not include any adjustment for typical seasonal patterns. “Along with being an important leading indicator of developments in the market for new homes, the BAS will provide additional color on the composition of sales in that market," said Fratantoni. "The BAS tracks monthly changes in national activity levels, average loan size and the types of loans buyers are seeking to fund their new home purchases. As we continue to expand the survey, we will release additional data and metrics, including geographic detail at the state and metro level." By product type, conventional loans composed 67.3 percent of loan applications, FHA loans composed 17.4 percent, RHS/USDA loans composed 1.9 percent and VA loans composed 13.4 percent. The average loan size for new home purchases decreased from $283,795 in May to $283,000 in June. “We saw the opportunity to measure new home financing, to understand the levels of loans and the types of loans being issued today,” said Jay Brinkmann, MBA senior vice president of research and education. Utilizing information from the BAS, as well as assumptions regarding market coverage and other factors, MBA estimates that sales of new single-family homes were running at a seasonally adjusted annual rate of 413,000 in June 2013. On an unadjusted basis, the MBA estimates that there were 39,000 new home sales in June 2013. “Participants in the survey collectively account for approximately 20 percent of new home sales based on the Census Bureau estimates," noted Fratantoni. "MBA will use the BAS data and assumptions regarding market coverage and other factors to arrive at our prediction of new home sales volume. Each month, the MBA will provide an estimate of the implied level of new home sales along with the data concerning the applications. As we broaden the survey coverage over time, we will refine our assumptions and increase the precision of the estimates. MBA’s estimate is seasonally adjusted in a manner similar to that used for the U.S. Census Bureau’s estimate.” The MBA puts an emphasis on seasonal patterns, utilizing the purchase index and week to week numbers at an adjusted rate to better get a handle on trends in the marketplace. When asked if the National Association of Home Builders (NAHB) had any input regarding the development of the survey, Fratantoni stated that the NAHB will have “no direct input, but we're in direct contact with their economists. Over time, we’ll be comparing notes and numbers to further refine the survey.” The MBA is hoping that the aggregated data is used by a variety of consumers, from building supply companies to analysts. The retail and direct channels are the primary targets of this latest BAS.
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