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Origination Forecast Slashed

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Despite an uptick in projected government originations, a decline in the outlook for conventional business has this year’s overall residential production $150 billion lower than last month’s prediction. Next year’s forecasted volume was slashed by $450 billion.

First-quarter home-loan fundings are forecasted to come in at $245 billion, according to Freddie Mac’s January 2011 Economic and Housing Market Outlook. Last month, Freddie had U.S. originations at $277 billion for the quarter.

The latest first-quarter forecast is a big drop from the estimated $420 billion closed in the fourth quarter. Freddie expects second-quarter production to rise to $275 billion.

The origination of mortgages insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs is expected to fall to $70 billion this quarter from the fourth quarter’s $93 billion. Government volume is expected to come in at $80 billion in the second quarter.

For all of 2011, Freddie has total originations at $1.050 trillion, down from last month’s prediction of $1.200 trillion. Expected government production was raised to $315 billion from $300 billion, but the projection for conventional business was cut to $735 billion from $900 billion.

Last year’s estimated fundings were $1.550 trillion, while Freddie forecasts $1.150 trillion in 2012. Next year’s forecast was slashed from the $1.600 trillion estimated by Freddie last month.

Freddie has adjustable-rate mortgages accounting for 7 percent of first-quarter volume, up from the prior period’s 6 percent. Second-quarter ARM share is expected to be 8 percent.

At the same time, refinance share is expected to fall from the fourth quarter’s 71 percent to 55 percent this quarter and 40 percent during the following three months.

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