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Fannie Hikes Q2 Origination Outlook

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Economists at the Federal National Mortgage Association have boosted by a quarter their prediction for loan originations during the second quarter. They also forecast that next year’s business will exceed 2010’s. But mortgages outstanding are expected to decline by more than $300 billion during the next 18 months.

Residential production by U.S. lenders is projected to reach $451 billion during the current quarter, Fannie Mae said in its June housing forecast. Originations were $307 billion in the first quarter and $596 billion in the second-quarter 2009.

Last month’s forecast from the Washington, D.C.-based firm had this quarter’s volume at just $361 billion.

More than half of second-quarter activity is expected to be refinance production, lower than the nearly two-thirds share in the prior quarter but higher than the 40 percent expected in the next quarter.

June’s report has third-quarter originations falling to $325 billion and bottoming out at $283 billion in the fourth quarter.

Full-year 2010 production is projected at $1.367 trillion, sinking from last year’s $1.922 trillion. Next year’s originations are estimated at $$1.559 trillion.

Fannie’s forecast has the share of adjustable-rate mortgages rising from the first quarter’s 5 percent to 6 percent in the current period. ARM share is expected to peak in the second-quarter 2011 at 11 percent.

Total single-family debt outstanding is expected to be $10.734 trillion this quarter, lower than $10.749 trillion three months earlier. By the beginning of next year — the U.S. mortgage portfolio is expected to bottom out at $10.429 trillion.

The second-quarter figure included $9.723 trillion in first liens, edging up from $9.561 trillion in the prior period.

Fixed-rate mortgages are forecasted to decline to 4.96 percent this quarter from 5.00 percent then ease another 0.01 percent in the third quarter.

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