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Dramatic Change in Mortgage Outlook Over Past Year

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Twelve months ago, the projection for 2012 mortgage originations was just $1 trillion — with more than three quarters of the volume coming from purchase financing. Fast forward one year and the purchase origination forecast has been slashed by 37 percent while the refinance forecast has increased more than 250 percent.

Second-quarter residential originations are expected to total $375 billion, slipping from the $383 billion in U.S. production during the first three months of the year. Fundings are predicted to retreat to $305 billion by the third quarter.

The projection was raised from last month, when second-quarter fundings were expected to be $361 billion then fall to $296 billion in the third quarter.

Fannie Mae, which released the June Housing Forecast on Tuesday, lifted its second-quarter refinance outlook to $235 billion from $227 billion, while its third-quarter refinance forecast was pushed up to $169 billion from $163 billion.

The outlook has refinance share falling to 63 percent this quarter from the first quarter’s 76 percent then declining to 55 percent in the third quarter.

Second-quarter purchase fundings, according to the secondary lender, are now expected to come in at $140 billion versus the $135 billion estimated last month. The third-quarter prediction for purchase activity was raised to $136 billion from $133 billion.

For all of 2012, Fannie predicts that total originations will come in at $1.336 trillion, slightly less than the $1.362 trillion in U.S. production last year. Volume is forecasted to fall to $1.083 trillion in 2013.

This year’s expected originations have increased from last month, when Fannie projected $1.306 trillion, and last June — when the outlook was for $1.012 trillion in 2012 volume.

What’s far more interesting than the year-over-year increase in projected 2012 production, however, is the breakdown of the total.

In the year-earlier forecast, just $241 billion in refinance originations were expected for 2012. The latest outlook has this year’s refinances at a whopping $851 billion.

But the projection for purchase production has been chopped from $771 billion to $485 billion.

Outstanding residential mortgages are expected to fall from $10.268 trillion last year to $10.111 trillion in 2012 then rise to $10.238 trillion next year.

The first-mortgage portion of outstandings is forecasted to decline from $9.395 trillion to $9.291 trillion then rise to $9.429 trillion in 2013.

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