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Purchase Finance Outlook Cut, Refi Raised

An increase in the forecast for refinance fundings was offset by a reduction in the projection for purchase production.

Residential lenders are expected to generate $320 billion in total loan fundings during the three months ended Sept. 30.

Business is expected to taper off in the following quarter to $260 billion then inch up to $265 billion in the first three months of 2015.

Freddie Mac. which projected the numbers in its September 2014 Economic and Housing Market Outlook, made no changes from its August outlook.

But when looking just at refinances, the third-quarter forecast was lifted to $144 billion from $99 billion, while the fourth-quarter outlook increased to $91 billion from $78 billion, and the first-quarter 2015 projection was raised to $93 billion from $80 billion. Refinance originations were estimated based on refinance share provided by Freddie.

Offsetting the improved refinance forecast was a diminished purchase outlook. Freddie cut its projection for the current quarter to $176 billion from $221 billion, and the following quarter’s forecast was lowered to $169 billion from $182 billion. Even the first quarter of next year looks worse, with the purchase outlook now at $172 billion versus the $186 billion expected last month.

At $1.150 trillion for this year and $1.050 trillion for 2015, there was no change to the overall annual origination outlook.

But, as was the case for the quarterly numbers, the 2014 refinance forecast increased — to $0.483 trillion from $0.426 trillion. Next year’s refinance volume is now expected to come in at $0.273 trillion compared to the $0.231 trillion previously expected.

Refinance share for this year is projected at 42 percent, while the 2015 refinance share is pegged at 26 percent.

Conversely, the 2014 purchase outlook fell to $0.667 trillion from $0.725 trillion, while next year’s purchase forecast was lowered to $0.777 trillion from $0.819 trillion.

Government mortgage originations are expected to be $0.233 trillion this year and $0.210 trillion during 2015, putting government share at 20.26 percent for 2014 and 20.00 percent next year.

Freddie has ARM share at 12 percent for this year and 15 percent for 2015.

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