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Origination Deterioration Ahead

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After reaching nearly a half trillion dollars in the fourth quarter, quarterly mortgage production is projected to plummet to less than $0.2 trillion by the beginning of next year.

U.S. residential originations will be $271 billion during the first quarter, the Mortgage Bankers Association predicted in its Mortgage Finance Forecast. The projection is a huge drop from the $462 billion closed in the final quarter of 2010.

Volume will inch up to $275 billion in the second quarter then fall back each period until the first-quarter 2012 — when it bottoms out at $181 billion.

The deflated activity is in line with a huge drop in refinance share — to a quarter by September from 78 percent recorded for the fourth-quarter 2010. This quarter’s share is expected to come in at 63 percent then nearly fall to a third in the second quarter.

The share of borrowers opting for an adjustable-rate mortgage is expected to rise from 5 percent in the fourth quarter to 6 percent this quarter then top out at 7 percent in the second quarter — where it will remain until at least the end of next year.

Annual home-loan production is forecasted to come in at $0.995 trillion this year, sinking from $1.572 trillion in originations by the country’s residential lenders in 2010. Next year’s activity will further deteriorate — to just $0.960 trillion.

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