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Refinance Forecast Raised by Nearly $100 Billion

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Mortgage Daily

                                                 March 19, 2012

The latest housing forecast has mortgage originations coming in 8 percent higher than was predicted just last month thanks to a nearly $100 billion boost to expected refinance activity. But the outlook for purchase production deteriorated.

First-quarter residential originations, including refinances and purchase fundings, are predicted to total $327 billion. The projection was increased from $300 billion forecasted last month.

The second-quarter prediction was also raised — to $291 billion from $271 billion.

In fact Fannie Mae, which released the forecast on Monday, raised its outlook for each quarter this year.

Behind the more optimistic outlook were refinances, which are now expected to total $327 billion in the first quarter and $291 billion in the second quarter versus last month’s respective projections of $300 billion and $271 billion.

Refinance share is estimated to come in at less than three quarters during the current period then hover just above half during for the remainder of the year.

But the estimate for first-quarter purchase financing was lowered to $90 billion from $92 billion, while the second-quarter forecast slipped to $137 billion from $138 billion.

Adjustable-rate mortgage share is predicted to be 6 percent during the first nine months of 2012 then finish the year at 5 percent.

Fannie has full-year 2012 production landing at $1.136 trillion, a big improvement over the $1.051 trillion forecasted in February. The annual refinance outlook increased to $0.659 trillion from $0.568 trillion, but the purchase projection was trimmed to $0.477 trillion from $0.483 trillion.

Next year, the secondary lender sees $1.056 trillion in total residential originations, including $0.424 trillion in refinances and $0.631 trillion in purchase financing.

Residential loans outstanding are expected to fall to $10.210 trillion this year from $10.291 trillion in 2011. The total is projected to decline to $10.157 trillion in 2013.

The first-mortgage portion of outstandings was estimated at $9.418 trillion last year and is expected to drop to $9.377 trillion in 2012 and $9.351 trillion next year.

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