Mortgage Daily

Published On: October 22, 2013

Economists at the Federal Home Loan Mortgage Corp. have raised their expectations for residential loan originations this year and next year.

In its October 2013 Economic and Housing Market Outlook, Freddie Mac projected that total U.S. mortgage production will go from $400 billion in the third quarter to $350 billion in the final three months of 2013 then rise to $383 billion in the first three months of next year.

Last month, the secondary lender forecasted that originations would fall from $400 billion to $300 billion then come in at $370 billion in the first-quarter 2014.

Based on refinance share projected by Freddie, the third-quarter forecast for refinance fundings was increased to $220 billion from $200 billion, and the fourth-quarter outlook expanded to $140 billion from $120 billion.

However, the third-quarter projection for purchase production was pulled down to $180 from $200 billion, while the fourth-quarter prediction was pushed up to $210 billion from $180 billion.

Freddie increased its third-quarter expectations for government originations to $85 billion from $80 billion and its fourth-quarter outlook to $75 billion from $65 billion.

The McLean, Va.-based company revised its estimate of total 2012 originations up $30 billion to $2.130 trillion. While the refinance portion of last year’s activity was left at $1.491 trillion, the purchase share was lifted to $0.639 trillion from $0.609 trillion.

This year’s total mortgage production is now expected to reach $1.850 trillion versus the $1.800 trillion predicted last month. The refinance projection was increased to $1.166 trillion from $1.116 trillion, the purchase forecast inched up to $0.685 trillion from $0.684 trillion and government originations are now expected to reach $0.359 trillion versus $0.344 trillion.

For 2014, Freddie increased its overall forecast to $1.400 trillion from $1.350 trillion. The upgrade reflected an increase to $0.574 trillion from $0.554 trillion in refinance originations and a boost in expected purchase financing to $0.826 trillion from $0.797 trillion. Even the government forecast was raised, to $0.280 trillion from $0.260 trillion.

Refinance share is forecasted to go from 70 percent in 2012 to 63 percent this year and 41 percent in 2014.

Government share was reduced to 17.84 percent for 2012 from 18.10 percent. The 2013 government share is projected at 19.41 percent compared to the 19.11 percent projected last month, while next year’s expected government share increased to 20.00 percent from 19.26 percent.

The share of 2013’s volume that is expected to be adjustable-rate mortgages is 10 percent, and next year’s ARM share is predicted to be 14 percent.

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