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The latest Weekly Mortgage Applications data produced by the Mortgage Bankers Association (MBA) offered a concerning data point Wednesday. Purchase applications, or those mortgage applications tied to the purchase of homes, dropped a dramatic 9%. But, never fear dear readers, as the reason for the decline proved irrelevant.

For the week ending June 15, 2012, the MBA's Market Composite Index of overall application activity decreased 0.8% on a seasonally adjusted basis. The Purchase Index, though, dropped 9% through the same period, raising an eyebrow at minimum, or for a Greek like me, maximum. As it turns out, the scary decline was "likely" due to a recalibration following the Memorial Day holiday. "Likely" is the MBA's descriptive term, and is troublesome in its uncertainty, because if they don't know then who can? I've followed this report regularly over the last several years, though, and have noted significant skew around three-day holidays. I've theorized that while the data is adjusted for the holiday, perhaps the fall-off in activity on the Friday before and the Tuesday following the long weekend is not accounted for. In any event, it's very likely you need not worry about the latest drop.

That said, I've recently reported that I still see homebuilders' shares as a risky option as far as equities go. For traders, though, I think the securities should offer a useful tool. That's because I expect the high-beta cyclical stocks will be at the whim of macroeconomic scares while also putting up decent EPS results as they gain market share from smaller crisis-hobbled competitors. Thus, there should be plenty of long and short opportunities for day traders of the group. See more about this topic via my article entitled Buy Homebuilders? No! Nein! Oxi!, which is focused on their longer term hinge to a deteriorating global economy.

The MBA's latest report also noted a 1% increase in the Refinance Index, as mortgage rates remained near historical record lows. In fact, conforming and jumbo loan rates for 30-year fixed rate mortgages did mark new lows on average, at 3.87% and 4.06%, respectively. FHA-backed 30-year rates inched up to 3.72%, while 15-year fixed rate mortgage rates rose slightly to 3.25%.

The MBA also noted that FHA refinance volume "exploded to an all-time high, more than doubling over the week." It was because new, lower FHA premiums on streamlined refinance loans came into full effect. The opportunity was not missed by those in need of reducing their financing costs, and that's a good thing for the economy and those struggling to make mortgage payments.

The nation's most important mortgage originators should factor mortgage activity into their valuation in some degree or another, though the shares are moving today on the much more important Fed catalyst. Still, in 2011 the largest originators were Wells Fargo (NYSE:WFC), down 0.6% today, Bank of America (NYSE: BAC) +0.4%, J.P. Morgan Chase (NYSE: JPM) +3.8%, Citigroup (NYSE: C) +2.1%, Ally, PHH Corp. (NYSE: PHH) -0.7%, U.S. Bancorp (NYSE: USB) -0.1%, Quicken, Flagstar Bancorp (NYSE: FBC) +2.9%, and BB&T (NYSE: BBT) unchanged.

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Source: Mortgage Scare Debunked