Origination Projection Slashed by $400 Billion

Second-quarter one- to four-unit mortgage originations were estimated at $0.675 trillion in Freddie Mac’s July 2009 Economic and Housing Market Outlook. Last month, Freddie predicted second-quarter activity of $730 billion.

U.S. residential production jumped from the first-quarter’s estimated $0.466 trillion and $0.550 trillion estimated for a year earlier. Third-quarter originations are projected at $0.625 trillion.

Second-quarter volume included $0.540 trillion in conventional business, lower than last month’s $0.603 trillion estimate and up from first-quarter originations of $0.370 trillion. Government originations increased to $0.135 trillion from the previous quarter’s $0.096 trillion. In June, Freddie predicted second-quarter government volume would be $0.128 trillion.

During all of this year, Freddie expects home loan fundings to come in at $2.300 trillion, climbing from $1.700 trillion in 2008. Next year’s originations are expected to reach $2.175 trillion.

Last month, Freddie projected 2009 production of $2.700 trillion.

Conventional share is projected at $1.850 trillion, tumbling from last month’s estimate of $2.238 trillion. FHA and VA originations are expected to represent $0.450 trillion of this year’s activity — slightly less than the prior projection of $0.463 trillion.

Adjustable-rate activity is expected to account for just 2 percent of second-quarter and full-year originations during 2009. Adjustable-rate share was 4.4 percent in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended July 3.

Freddie estimated that the refinance share of applications was 65 percent during the latest quarter, falling from the first quarter’s 78 percent. Refinances represented 48 percent of applications in MBA’s survey. Full-year refinance share was estimated by Freddie at 63 percent.

The average 30-year fixed-rate mortgage, which was 5.20 percent in Freddie’s Primary Mortgage Market Survey for the week ended July 9, is expected to rise to 5.4 percent this quarter then steadily increase to 6.0 percent by the end of next year.