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2012 Origination Forecast Raised by Over $100 Billion

Mortgage News

The latest outlook for this year’s overall home-loan production was lifted by more than $100 billion. But the revision for expected home purchase financing was negative. The runoff in the U.S. residential loan portfolio looks to be coming to an end.

Annual origination of U.S. residential loans is expected to reach $1.255 trillion during all of 2012.

Last year’s production was $1.362 trillion, while volume is expected to decline to $1.065 trillion in 2013.

In its March outlook, Fannie Mae predicted that this year’s volume would be $1.136 trillion, and next year’s activity was expected to fall to $1.056 trillion.

The improved mortgage banking forecast came despite a reduction in expected home purchase financing to $468 billion versus the $477 billion in 2012 purchase activity predicted in the previous report.

Annual refinance business is now projected to be $787 billion, revised from $659 billion a month ago.

Fannie predicts that total mortgage originations will fall to $349 billion in the second quarter from an estimated $375 billion in the first quarter.

However, reports from the Federal Housing Administration, JPMorgan Chase & Co. and Wells Fargo & Co. indicate that new applications picked in the first quarter — a good sign that second-quarter originations could increase.

Fannie raised its first-quarter estimate of refinance volume to $286 billion from $236 billion, while the second-quarter refinance projection jumped to $214 billion from $155 billion.

Refinance share is expected to slip to 61 percent this quarter from 76 percent in the first quarter. The proportion of refinances to total activity is expected to exceed half through the second half of the year.

The share of originations that will be adjustable-rate is forecasted to go from the first quarter’s 6 percent to 7 percent over the next two quarters. ARM share is then expected to settle at 6 percent through the end of next year.

As of the first quarter, outstanding home loans amounted to $10.251 trillion, contracting from $10.291 trillion at the end of 2011. By the end of this year, outstanding mortgages are expected to fall to $10.237 trillion.

But Fannie sees an end to the runoff in the nation’s book of business. The balance is projected to finish the first-quarter 2013 at $10.197 trillion then climb to $10.230 trillion three months later.

The first-lien portion of outstandings was $9.392 trillion as of the first quarter, sliding from $9.418 trillion at the end of 2011. First-lien outstandings are projected to finish this year at $9.402 trillion then climb to $9.443 trillion by the end of 2013.

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