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Refi Forecast Lifted as Purchase Outlook Dims

Mortgage News

Mortgage bankers nudged up their expectations for this year’s originations — largely a result of a jump in second-half refinance activity. But purchase-transaction expectations were lowered, and next year’s U.S. outlook was cut by more than $50 billion.

Second-quarter home-loan fundings from all U.S. mortgage bankers are expected to end at $295 billion, down from the first quarter’s $302 billion, the Mortgage Bankers Association forecasted. Volume is expected to fall to $263 billion in the third quarter then decline to $190 billion for the final three months of the year — worse than last month’s projection of $206 billion.

MBA sees refinance production falling from $177 billion during the current quarter to $132 billion in the third quarter and just $57 billion in the final period. Still, this month’s projection has second-half refinance volume 42 percent higher than last month’s outlook.

Refinance share will fall from almost two-thirds in the first quarter to 60 percent this quarter, half in the third quarter and less than a third in the last three months of this year. The preceding report called for refinance share to fall below a third in the third quarter and to just one-quarter in the last three months of 2011.

At the same time, MBA’s forecast for second-half purchase activity was reduced to $265 billion from last month’s estimate of $336 billion.

For the full 12 months of this year, residential originations are estimated at $1.050 trillion, much lower than the $1.572 trillion that lenders closed last year. In April, MBA predicted $1.070 in annual volume for this year.

The decline from the previous forecast was primarily due to the outlook for purchase business — which was slashed from $558 billion in the prior prediction to $488 billion.

MBA upped its overall forecast for 2012 to $1.025 trillion from $0.966 trillion.

The share of production that will be for adjustable-rate mortgages will be 7 percent each quarter this year and during the first-three months of next year.

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