Two different indexes tracking mortgage activity yielded wildly different conclusions Wednesday, leaving some investors to conclude that the number of distressed borrowers may yet be understated in key industry statistics. A widely-watched index released by the Mortgage Bankers Association Wednesday morning found that overall application activity — fueled by both purchase and refinance applications — bounced up 3.6 percent last week, off of a six and one-half year low recorded the previous week. But did it really? A separate index maintained by Mortgage Maxx LLC, a company that provides prepayment data to Wall Street researchers, reached a much different conclusion on Monday: applications fell 5.4 percent and marked new 2008 low. Applications in California fell even further, Mortgage Maxx reported, plummeting 7.7 percent. All of which is enough to leave the most staid prepayment researcher somewhat vexed. “The two data sources will usually vary in magnitude but not as often in direction,” said one ABS analyst that spoke to HW. “We’ve been seeing plenty of situations this year where the Max shows a decline while the MBA shows a bump.” Such trending might be explained by the one salient feature that has tended to keep the Max index favored among ABS analysts, despite its more limited geographic sampling: correction for multiple applications on the same address. HW’s Linda Lowell, a 20 year ABS/MBS market veteran, noted in a previous story that analysts found out the hard way during the recent housing boom that the MBA data tended to overstate increases in loan demand, as brokers encouraged borrowers to shop around for the best rate (such shopping yielded multiple applications for a single loan). Loan application data is used in prepayment calculations by research, a vital statistic in the secondary mortgage market for pricing activity. That same demand overstatement problem that plagued MBA application data during the boom now appears as if it could be a problem in the downturn, however, as troubled borrowers hurriedly attempt to qualify for any mortgage, and brokers encourage borrowers to apply as many times as possible to ensure that they are approved for a loan. With programs changing every day, it’s also likely that many borrowers are falling out and being forced to reapply in some cases. Of course, that evidence is entirely anecdotal at this point, but it seems to be the only plausible explanation for why the two indexes can diverge so starkly in the current market. Given that application data is used to predict housing demand, understanding the reasons both indexes split should be of key importance to anyone serious about remaining in the mortgage market. Worth noting: The MBA reported that its data showed refinance applications representing just 36.8 percent of the overall application activity; FHA applications jumped 3.4 percent … Mortgage Maxx CEO Paul Desclous noted that new grant deeds appear to have peaked on the heels the spring selling season, and likely pressure on future home sales activity was likely to follow.