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2013 Refinance Outlook Improves

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Just a month after it was lowered, the forecast for residential refinance originations was lifted for this year. Mortgages outstanding are on track to exceed $10 trillion again.

Mortgage lenders are expected to generate $519 billion in home loan production during the second quarter then scale back activity to $374 billion in the third quarter. Production includes both refinances and purchase financing.

Despite the quarter-over-quarter decline, forecasted second-quarter volume was more than the $481 billion that was predicted last month.

Fannie Mae, which made the predictions in its Housing Forecast: May 2013, adjusted its final estimate of first-quarter volume down to $458 billion from the $464 billion predicted in the previous report.

Refinances are expected to fall from $344 billion in the current period to $201 billion in the third quarter. The second-quarter refinance outlook was lowered from last month, when expectations were for $306 billion in volume.

Fannie predicted that second-quarter refinance share will come in at two-thirds, while the third-quarter share was pegged at 54 percent.

Purchase production is projected to slip from $175 billion in the second quarter to $173 billion — the same as was previously predicted.

Fannie has full-year originations going from $1.659 trillion this year to $1.143 trillion in 2014.

The annual amount was raised from last month, when fundings were expected to increase from $1.627 trillion to $1.125 trillion.

This year’s refinance forecast increased to $1.052 trillion from $1.014 trillion, and the 2014 refinance outlook rose to $0.426 trillion from $0.406 trillion.

In last month’s outlook, Washington, D.C.-based Fannie lowered its 2013 refinance outlook.

The refinance forecast reflects a 63 percent refinance share for 2013 and a 37 percent share for next year.

Purchase production, meanwhile, is expected to climb from $0.608 trillion to $0.717 trillion in 2014 — off slightly from the $0.613 trillion and $0.719 trillion previously expected for 2013 and 2014, respectively.

Residential loans outstanding will climb from $9.989 trillion this year to $10.211 trillion in 2014, according to Fannie’s forecast. The total had been higher than $11 trillion as recently as 2008 and fell below $10 trillion in 2012.

First liens will account for $9.236 trillion of the 2013 total and $9.462 trillion of the 2014 amount.

Fannie expects 6 percent of this year’s business to be adjustable-rate mortgages, inching up from 5 percent in 2012. Next year’s projected ARM share is 8 percent.

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