Ahead of the Bell - Mortgage Applications

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Investors on Wednesday will get an update on home loan applications as mortgage industry turmoil grows and the housing market s slump persists.

The Mortgage Bankers Association is due to report its weekly index of home-loan application volume at 7 a.m. EDT.

The index fell a week ago after rising for the past two weeks. For the week ending August 17, the Mortgage Bankers Association said its market index shrank a seasonally adjusted 5.5 percent to 641.1.

But with so much volatility in the industry, the group said weekly results should be regarded with caution. Increases in applications could have been caused by borrowers forced to reapply for loans after lenders went bankrupt.

Many of the lenders that sprouted amid this decade s housing boom are having trouble as credit tightens and home prices deteriorate. More than 50 home lenders have gone bankrupt this year.

The credit problems have spread in recent weeks from subprime loans made to borrowers with weak credit to the broader mortgage market, making investors nervous about nearly all types of home loans.

The MBA s index, which stood at 100 in March 1990, is derived from a survey of major mortgage lenders representing about half of the U.S. market and does not include loans originated by nonbank lenders. The index has fluctuated this year after sinking last summer to its lowest level since 2002.

Total subprime lending was down more than 50 percent in the first half of the year as lenders pulled back from risky loans. Countrywide Financial Corp. was the top subprime lender, followed by Citigroup Inc., HSBC Holdings PLC, Merrill Lynch & Co. subsidiary First Franklin Financial Corp. and Wells Fargo & Co, according to trade publication Inside Mortgage Finance.

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