Mortgage bankers jumped up their estimate of last year’s originations by nearly $300 billion, raised their expectations for this year’s activity by $140 billion and increased the 2014 forecast by nearly $100 billion.
Total residential originations are expected to fall from the third quarter’s $401 billion to $283 billion this quarter then decline further to $273 billion in the first three months of next year.
The projections were raised from last month, when volume was expected to go from $369 billion to $260 billion in the fourth quarter then fall to $251 billion in the first-quarter 2014.
The Mortgage Bankers Association made the latest predictions in its MBA Mortgage Finance Forecast released Tuesday.
Refinances are expected to account for $136 billion of fourth-quarter volume and $131 billion of activity in the first quarter of next year, while purchase financing is projected to make up $147 billion of the current quarter’s activity and $142 billion of the following three-month period’s originations.
MBA revised its full-year estimate of 2012 mortgage production up to $2.044 trillion from last month’s estimate of $1.750 trillion. The refinance estimate was raised to $1.456 trillion from $1.247 trillion, and the purchase estimate increased to $$0.587 trillion from $0.503 trillion.
The total outlook for this year is $1.745 trillion in residential originations, up from $1.605 trillion predicted last month. The 2013 refinance forecast is $1.083 trillion versus last month’s outlook of $0.989 trillion, and purchase financing is now expected to come in at $0.661 trillion compared to $0.616 trillion.
Outgoing MBAÂ Chief Economist Jay Brinkmann attributed the upward revisions to a shift in market shares reported in the latest Home Mortgage Disclosure Act data release.
“We revised our origination estimates for 2012 and 2013 based on the 2012 HMDA data released in September 2013,” Brinkmann explained. “The data showed a higher share of originations going to independent mortgage lenders, particularly purchase mortgages. In 2012, 40 percent of the purchase volume was originated by independent mortgage companies, up from 36 percent in 2011.”
MBA increased its projection for 2014 total volume to $1.186 trillion from $1.091 trillion in the prior outlook. The refinance forecast grew to $0.463 trillion from $0.388 trillion, and the purchase projection expanded to $0.723 trillion from $0.703 trillion.
“We are projecting home purchase originations will increase in 2014 due largely to gains in home sales and home prices,” Brinkmann said in a statement. “We expect to see a decline in the share of sales paid for with cash, and higher average LTVs on purchase mortgages, due to the rise in home prices.”
He added that the brighter outlook reflects ongoing improvements in the broader economy and the jobs market.
The trade group published its first forecast for 2015, with $1.229 trillion in total production expected — including $0.433 trillion in refinances and $0.796 trillion in purchases.
“We will potentially see a small increase in refinances toward the end of 2015 as the Home Affordable Refinance Program 2.0 expires but HARP activity during 2014 will still be low,” Brinkmann explained. “While on paper the number of HARP-eligible borrowers appears large, the reality is these borrowers have been unresponsive to numerous attempts to encourage them to participate in the program and are less likely to do so now that rates have gone up.”
Refinance share is predicted to fall from 62 percent in 2013 to 39 percent next year then retreat further to 35 percent in 2015.
