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Purchase Financing Soars Past Forecast

Mortgage News

The volume of estimated home-purchase loan production in the fourth quarter came in 21 percent higher than was expected just last month — a good sign the housing market is strengthening. The outlook for the current quarter, including both purchases and refinances, is for volume to plunge by 29 percent from the final quarter of last year.

Residential loan originations during the first quarter are projected to come in at $290 billion, sinking from $408 billion in the fourth-quarter 2011.

Fannie Mae, which delivered the forecast Friday in its January housing forecast, previously had first-quarter production at $276 billion and fourth-quarter volume at $398 billion in its December outlook.

Home-purchase financing is expected to reach $90 billion in the first quarter, falling from the fourth quarter’s estimated $108 billion. Fannie jacked up its fourth-quarter purchase estimate from $89 billion predicted in the prior outlook.

On the refinance side, originations are expected to sink from an estimated $300 billion to $200 billion this quarter. The secondary lender previously had refinances falling from $310 billion to $192 billion.

Full-year 2012 business is forecasted to drop to $1.011 trillion this year from $1.358 trillion in 2011. The estimate for this year’s production was lifted from last month’s prediction of $0.991 trillion.

Next year, Fannie has originations at $1.001 trillion.

Refinance share is expected to slide to 69 percent this quarter from 73 percent in the last three months of 2011 then drop to half in the second quarter.

The share of borrowers who opt for an adjustable-rate mortgage is projected to be 6 percent during the first three quarters of 2012 then fall to 5 percent in each of the following three quarters.

Mortgages outstanding finished 2011 at an estimated $10.268 trillion and are expected to decline to $10.139 trillion by the end of this year.

The Dec. 31, 2011, outstandings included an estimated $9.399 trillion in first liens. By Dec. 31, 2012, first mortgages outstanding are predicted to be $9.315 trillion.

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