The quarterly estimate of government-insured loan production has been cut 21 percent, though an increase in the projection for conventional business offset the reduction. Third-quarter purchase transactions were previously significantly underestimated, while the outlook for refinance activity has been lifted significantly.
Fourth-quarter residential originations from all U.S. lenders are expected to come in at $371 billion, rising from the third quarter’s $304 billion. But business will retreat during the first three months of next year to $270 billion.
That prediction came Monday from the Federal Home Loan Mortgage Corp.
The fourth-quarter projection includes $88 billion in loans insured by the Federal Housing Administration. Freddie Mac scaled back its FHA outlook from $111 billion forecasted last month. Even third-quarter FHA production was rolled back to $69 billion from $85 billion estimated in the prior report.
But Freddie raised its expectations for fourth-quarter conventional volume — to $283 billion from $260 billion previously predicted. Estimated third-quarter conventional originations were raised to $235 billion from $214 billion.
During the first half of next year, Freddie now expects mortgage bankers to originate $439 billion in conventional business versus the $368 billion projected in last month’s report.
While Freddie scaled back its estimate of refinance production during the third quarter to $207 billion from $218 billion, the fourth quarter forecast was bumped to $297 billion from $286 billion. In addition, first-half 2012 refinance business is now expected to amount to $430 billion compared to last month’s forecast of $370 billion.
Refinance share is expected to fall from 80 percent this quarter to 77 percent in the first quarter of next year.
Freddie increased its estimate of third-quarter purchase production to $97 billion from the $85 billion Freddie previously reported. The fourth-quarter purchase projection, however, was lowered to $74 billion from $85 billion.
Freddie left its forecast of $1.300 trillion in total production this year unchanged. But the 2012 projection was raised to $1.135 trillion from $1.000 trillion, while 2013 volume is now expected to total $1.065 trillion versus $1.000 trillion.
